The prosperity of Neolithic rice agriculture along the Yangtze River Valley (China) under the humid East Asian Monsoon has been well documented. However, the way in which major hydrological changes influenced the expansion of rice farming remains elusive, mainly because detailed climate records associated with critical periods of the development of early rice farming are still lacking. Here we present high-resolution n-alkane carbon (δ13C) and hydrogen (δD) isotope data sampled every 5 cm from a 360 cm sedimentary sequence spanning an ∼5 k.y. period at the Tianluoshan archaeological site in China’s eastern coastal region. Combined with micropaleontological records, our dual isotope data reveal a detailed climate change profile between 7.0 and 4.6 ka, showing major hydrological changes that coincided with the early development of rice farming in the lower Yangtze region. Two major evapotranspiration events, indicated by synchronized positive δ13C and δD shifts of as much as 5‰ (δ13C) and 60‰ (δD), are evident ca. 7.0 ka and 6.4 ka, and coincided with regional sea-level changes. Our new isotope data suggest that these short drought climate conditions superimposed upon local sea-level regressions opened suitable new habitats for expanding rice agriculture in the lower Yangtze Delta when subsequent humid climate regimes returned.