The New England Orogen in eastern Australia exhibits an oroclinal structure, but its geometry and geodynamic evolution are controversial. Here we present new data from the southernmost part of the oroclinal structure, the Manning Orocline, which supposedly developed in the Early Permian, contemporaneously and/or shortly after the deposition of the Lower Permian Manning Basin. New U‐Pb detrital zircon data provide a maximum depositional age of ~288 Ma. Structural evidence from rocks of the Manning Basin indicates that both bedding and preoroclinal fold axial planes are approximately oriented parallel to the trace of the Manning Orocline. Brittle deformation was dominated by sinistral strike‐slip faulting, particularly along a major fault zone (Peel‐Manning Fault System), which is marked by the occurrence of a serpentinitic mélange, and separates tectonostratigraphic units of the New England Orogen. Our revised geological map shows that the Manning Basin is bounded by faults and serpentinites, thus indicating that basin formation was intimately linked to deformation along the Peel‐Manning Fault System. The Manning Basin is thus interpreted to be a transtensional pull‐apart basin associated with the Peel‐Manning Fault System. Age constraints and structural relationships indicate that basin formation likely occurred during the incipient stage of oroclinal bending, with block rotations and fragmentation of the transtensional pull‐apart system occurring subsequently. The intimate link between oroclinal bending and basin formation in the New England oroclines indicates that back‐arc extension, accompanied by transtensional deformation, could have played an important role in the early stage of orocline development.