Oxygen and carbon isotopic ratios of bulk sediments from ODP Leg 181, holes 1121B and 1124C, in the Southwest Pacific were measured. The isotopic signals are mainly contributed by calcareous nannofossils with minimal diagenetic alteration. A complete section of the late Paleogene age between 60.7 and 57.5 Ma was recovered from Hole 1121B. However, the Paleogene sedimentary sequence of Hole 1124C was truncated by three major hiatuses: late Paleocene to middle Eocene (59-42 Ma), middle Eocene to early Oligocene (40-33.5 Ma), and early Oligocene to middle Oligocene (31.3-27.5 Ma). The middle Eocene shows the most negative delta (super 18) O values (c. -0.8) compared to the early Paleocene (c. -0.2 to -0.3) and Oligocene (c. 0.6-0.9). The delta (super 18) O pattern is consistent with previous understanding of the Paleogene paleoclimate: a warmth optimum in the early-middle Eocene followed by a major glaciation in the early Oligocene at c. 34 Ma. The hiatus of 33.5-40 Ma indicates that the Tasmanian Gateway had deepened enough by 33.5 Ma, allowing the breakthrough of cold, bottom water and consequently the formation of the Deep Western Boundary Current (DWBC). With the aid of independent biochronological and magnetochronological markers, the Paleocene carbon isotopic profiles were correlated with that of DSDP 577 in the North Pacific. Both sites record the early part of the Paleocene carbon isotopic maximum event, while only Hole 1124C extends back to the early Paleocene and latest Cretaceous. A short hiatus of 60.5-62.5 Ma age may exist. Although the Cretaceous/Tertiary boundary is not directly recorded, a significant cooling trend across the boundary is evident. The surface water became warmer after 64.5 Ma, and reached a stable warmth level during 64-59 Ma. A major cooling took place during c. 59-57 Ma in the late Paleocene. The temperature gradients between the two sites (ODP 1121 and 1124, paleolatitudes 64 degrees S versus 53 degrees S) are estimated to be c. 2 degrees C. Together with the oxygen isotopic profiles of North Pacific (DSDP 577, paleolatitude 7 degrees N) and eastern Indian Ocean (ODP 761B, paleolatitude 32 degrees S), the overall pattern suggests that the temperature gradients between the high latitudes and the subtropics increased substantially during this cooling period.