Quaternary faulting and background seismicity in the southern Sierra Nevada microplate are concentrated east and south of the Isabella anomaly, a high-velocity body in the upper mantle interpreted to be lower Sierra lithosphere that is foundering into the asthenosphere. We analyzed seismicity in this region to evaluate patterns of upper crustal deformation above and adjacent to the Isabella anomaly. Earthquakes in the southern Sierra and San Joaquin Valley were relocated using joint hypocentral inversion and double-difference techniques, and groups of focal mechanisms were inverted for the components of a reduced deformation rate tensor. The deformation field derived from this analysis reveals two distinct departures from horizontal plane strain associated with distributed northwest-directed dextral shear east of the Pacific plate: (1) heterogeneous extension and crustal thinning in the high Sierra and western foothills east of the Isabella anomaly; and (2) pronounced counterclockwise rotation of the principal strains from regional trends in the southwestern Sierra Nevada and across the Kern Arch. Based on comparison with a three-dimensional tomographic model, the extension in the southern Sierra is spatially associated with relatively thinner crust and anomalous low P-wave speeds in the upper mantle (40–90 km depth range) directly east of the Isabella anomaly. These relations suggest that seismogenic crustal thinning is localized above upwelling asthenosphere that is replacing foundering lithosphere. Counterclockwise rotation of strain trajectories in the southwest Sierra occurs southeast of the Isabella anomaly, and is associated with seismogenic west-northwest–striking dextral faults. We suggest that the deformation here represents westward encroachment of dextral shear into the microplate from the eastern California shear zone and southern Walker Lane belt. The strain rotation may reflect the presence of local stresses associated with relaxation of subsidence in the vicinity of the Isabella anomaly. Westward propagation of foundering lithosphere, with spatially associated patterns of upper crustal deformation similar to those documented herein, can account for observed late Cenozoic time- and space-transgressive deformation in the southern Walker Lane belt east of the Isabella anomaly, and is a potentially observable consequence of the foundering process in other orogens.