The influence of each phase of the Indian Ocean dipole (IOD) on the large-scale circulation in South America is investigated using rainfall observations, fully coupled, large-ensemble, historical simulations (LENS), and forced experiments using the coupled model’s atmospheric component. IOD events often occur when El Niño–Southern Oscillation (ENSO), the largest source of interannual variability of precipitation in South America, is active. To distinguish from effects of ENSO, only cases during neutral ENSO conditions are analyzed in LENS and observations. During the positive IOD polarity, a perturbation in the local Walker circulation leads to increased convection over equatorial South America, resulting in wet anomalies in the Amazon basin. This signal is the opposite of what is expected during El Niño events. Tropical convection anomalies in the Indian Ocean also force an extratropical Rossby wave train that reaches subtropical South America. During positive IOD, the moisture flux from the Amazon to central and southeastern Brazil weakens, resulting in a drying of the area associated with the South Atlantic convergence zone. Meanwhile, the South Atlantic subtropical high strengthens, contributing to a drying in southeastern Brazil. During negative IOD, the induced wave train from the Indian Ocean leads to increased moisture transport to the La Plata basin, leading to wet anomalies in the region.