Approximately 34 m.y. ago, Earth's climate transitioned from a relatively warm, ice-free world to one characterized by cooler climates and a large, permanent Antarctic Ice Sheet. Understanding this major climate transition is important, but determining its causes has been complicated by uncertainties in the basic patterns of global temperature and ice volume change. Here we use an unusually well exposed coastal incised river-valley complex in the Western Desert of Egypt to show that eustatic sea level fell and then rose by ∼40 m 2 m.y. prior to establishment of a permanent Antarctic Ice Sheet. This fall in sea level is associated with a positive oxygen isotope excursion that has been interpreted to reflect global cooling, but instead records buildup of an Antarctic Ice Sheet with a volume ∼70% of the present-day East Antarctic Ice Sheet. Both the sea-level fall and subsequent rise were coincident with a transient oscillation in atmospheric CO2 concentration down to ∼750 ppm, which climate models indicate may be a threshold for Southern Hemisphere glaciation. Because many of the carbon emission scenarios for the coming century predict that atmospheric CO2 will rise above this same 750 ppm threshold, our results suggest that global climate could transition to a state like the Late Eocene, when a large permanent Antarctic Ice Sheet was not sustainable.