A rock magnetic study of the upper 40 m of the Ocean Drilling Program Site 133-820A recovered at the outer edge of the northeastern Australian continental margin shows that downcore variations in magnetic parameters are diagenetically driven and correlate with the changes in global sea level. We identified intervals enriched in single-domain (SD) magnetite in the studied section. Unlike previous studies that postulated a detrital source, we show that the bulk of the SD fraction is biologically produced and is likely to be authigenic. The abundance of SD magnetite thus cannot be used as an indicator for provenance or sediment transport mechanisms. The biogenic magnetite was preserved during the high sedimentation rate periods, likely due to a short residence time in the corrosive zone of active iron reduction. The presence of the biogenic magnetite thus can be used as an indicator for a low degree of reductive dissolution. More advanced dissolution during the periods of slow sedimentation, coincident with sea level highstands, resulted in significant changes in the composition of the detrital assemblage, particularly in relative abundances of different mineral phases. The overall stability of the detrital magnetic minerals toward dissolution varies in the studied section as hematite > magnetite > goethite. Due to the higher stability of hematite, reductive diagenesis in general will lead to the lowering of the goethite/hematite (G/H) ratio, which can be mistaken for an increased aridity in the sedimentary source areas in the conventional interpretation for this proxy. The sensitivity of the G/H proxy to diagenesis should be taken into account in paleoenvironmental studies.