During the Early Jurassic, cyst-forming dinoflagellates began a long-term radiation that would portend ecological importance of these taxa in the pelagic plankton community throughout the rest of the Mesozoic era. The factors that contributed to the evolutionary success of dinoflagellates are poorly understood. Here we examine the relationship between oceanographic and climatic conditions during the Hettangian–Toarcian interval in relation to the radiation of dinoflagellates and other organic-walled phytoplankton taxa in the Tethys Ocean. Our analysis is based on two data sets. The first includes δ13Ccarb, δ13Corg, total organic carbon (TOC), and quantitative palynological observations derived from the Mochras Core (Wales, U.K.), which spans the complete Early Jurassic. The second is a coupled Mg/Ca and δ18O record derived from analyses of belemnite calcite obtained from three sections in northern Spain, covering the upper Sinemurian to Toarcian. From these two data sets we reconstructed the influence of sea level, trophism, temperature, and salinity on dinoflagellate cyst abundance and diversity in northwest Europe. Our results suggest that organic-walled phytoplankton (acritarchs, prasinophytes, and dinoflagellates) diversity increased through the Early Jurassic. The radiation coincides with a long-term eustatic rise and overall increase in the areal extent of continental shelves, a factor critical to cyst germination. On shorter timescales, we observed short bursts of dinoflagellate diversification during the late Sinemurian and late Pliensbachian. The former diversification is consistent with the opening of the Hispanic Corridor during the late Sinemurian, which apparently allowed the pioneer dinoflagellate, Liasidium variabile, to invade the Tethys from the Paleo-Pacific. A true radiation pulse during the late Pliensbachian, with predominantly cold-water taxa, occurred during sea level fall, suggesting that climate change was critical to setting the evolutionary tempo. Our belemnite δ18O and Mg/Ca data indicate that late Pliensbachian water masses cooled (ΔT ≈ −6°C) and became more saline (ΔS ≈ +2 psu). Cooling episodes during generally warm and humid Early Jurassic climate conditions would have produced stronger winter monsoon northeast trade winds, resulting in hydrographic instability, increased vertical mixing, and ventilation of bottom waters. During the late Pliensbachian, dinoflagellates replaced green algae, including prasinophytes and acritarchs, as primary producers. By producing benthic resting cysts, dinoflagellates may have been better adapted to oxidized ocean regimes. This hypothesis is supported by palynological data from the early Toarcian ocean anoxic event, which was marked by highly stratified anoxic bottom water overlain by low-salinity, warm surface waters. These conditions were advantageous to green algae, while cyst-producing dinoflagellates temporarily disappeared. Our results suggest that the rise in dinoflagellate diversity later in the Jurassic appears to correspond to deep water ventilation as a result of the opening of the Atlantic seaway, conditions that appear to have simultaneously led to a loss of prasinophyte dominance in the global oceans.