We will show that the dominant mode of the Asian-Australian monsoon (A-AM) variability on interannual time scale has a principal biennial tendency. This biennial mode essentially concurs with the turnabout of El Nino (and La Nina) events. Its season-dependent evolution from one summer to the next is characterized by two off-equatorial anomalous surface anticyclones dominating, respectively, the South Indian Ocean (SIO) and the western North Pacific (WNP). The SIO anticyclone occurs during the El Niņo development and the WNP anticyclone attains maximum intensity during mature and decay of El Niņo events. The anomalous rainfall in India, Africa, Australia-Indonesia and East Asia are all linked to the evolution of the two anomalous anticyclones. What mechanisms are responsible for this dominant mode? A widely-held view is that A-AM anomalies are primarily forced by El Nino/La Nina and warm-pool SST anomalies. In contrasting to this traditional view, we argue that (1) while the remote ENSO forcing plays important role in setting up the two anticyclones, it alone explains neither the extraordinary amplification of the SIO anticyclone nor the maintenance of the WNP anticyclone; (2) the warm pool SST anomalies are largely a result of the anomalous monsoon and can not regard as a sole forcing mechanism to A-AM variation. We propose that the interannual variability of the A-AM is attributed to three factors: the remote ENSO forcing, the local anomalous monsoon-warm ocean interaction, and the annual cycle of monsoon circulation. The atmosphere-ocean conditions in the SIO and WNP are similar, namely, an east-west anomalous SST dipole with cold water to the east and warm water to the west of the anticyclone center. These coherent conditions result from a positive feedback between the anomalous descending atmospheric Rossby waves and SST dipole. The air-sea interaction in the two regions share common wind-evaporation/entrainment and cloud/radiation feedbacks but differ in the roles of oceanic dynamics in SST variability. Numerical experimentations with coupled ECHAM AGCM-UH intermediate ocean model demonstrate that the local monsoon-ocean interaction plays an important role in the evolution of the anomalous SIO and WNP anticyclones. In addition to the monsoon-ocean interaction and ENSO forcing, the annual cycle of the background flows is also an active player that attributes to the interannual variability. First, the positive anomalous monsoon-ocean feedback processes are controlled by the seasonal cycle of background flows. Second, the background monsoon circulation can remarkably modify the atmospheric response to remote anomalous ENSO forcing. During the summer of El Niņo development, a tilted anticyclonic ridge originating from the maritime continent and extending to south India exhibits considerable equatorial asymmetry, which results from the effects of easterly vertical shear on Rossby waves. The understanding obtained from this study leads to a new paradigm for TBO.