Deciphering the climatic evolution of the Tibetan Plateau region during the Plio-Pleistocene is hampered by the lack of continuous archives and proxy datasets indicative of moisture availability. Here we assess the suitability of magnetic susceptibility (χ) measured on lacustrine sediments as a paleohydrological proxy based on material from drill core SG-1 (2.69–0.08 Ma) from the western Qaidam Basin. Our assessment is based on directly comparing χ with the Artemisia/Chenopodiaceae (A/C) pollen ratio, which represents a sensitive, well-established proxy for moisture changes in arid environments. We find that higher and lower χ values represent drier and less dry conditions, respectively, for the Late Plio-Pleistocene. Less dry phases were likely caused by transiently increased influence of the westerlies and/or decreased influence of the Asian winter monsoon on glacial–interglacial time scales. An exception from this relationship is the interval between ~ 1.9 and 1.3 Ma, when the SG-1 χ record exhibits a 54 ka cyclicity, which may indicate summer monsoon influence on the Qaidam Basin during that time. After ~ 1.3 Ma, the summer monsoon influence may have ceased due to global cooling, with the consequence that the Asian winter monsoon and the westerlies exerted a stronger control on the hydrology of the Qaidam Basin.