A numerical model is used to investigate how the Indonesian Throughflow and tidal mixing are affecting the seasonal cycle of the sea surface temperature (SST) in the Indonesian Seas. The SST in these seas is considered to play a major role on the development of the Australian Summer Monsoon. Based on a quantitative assessment of the heat budget, the Indonesian Throughflow is found to affect the SST in the western Indonesian Seas primarily during Austral summer. The Throughflow advects the warm water from the Pacific and maintains the warm SST when the Northwestern Monsoonal wind induces coastal upwelling along the northern side of the Nusa Tenggara and cools the SST. Such balance is supported by observations. The hydrographic sections show the isotherms tilting upward toward the northern coast of the Nusa Tenggara when satellite observations show slight decrease of the SST in the region. Tidal mixing is found to cool the SST during summer the most. This is because the Northwest Monsoonal wind induces coastal upwelling near where strong tidal mixing above seamount occurs and brings the tidally well‐mixed upper thermocline water to the surface. The surface Ekman flow also spreads this cool water around the Banda Sea where tidal mixing does not occur. The impact of tidal mixing on the SST is also found to come largely from that occurring above seamounts. The impact of tidal mixing on the continental shelves is limited to shelf‐breaks because cold subsurface water is necessary for enhanced vertical mixing to cool the SST.