[1] Measurements of the surface energy balance, the structure and evolution of the convective atmospheric reef layer (CARL), and local meteorology and hydrodynamics were made during June 2009 and February 2010 at Heron Reef, Australia, to establish the relative partitioning of heating within the water and atmosphere. Horizontal advection was shown to moderate temperature in the CARL and the water, having a cooling influence on the atmosphere, and providing an additional source or sink of energy to the water overlying the reef, depending on tide. The key driver of atmospheric heating was surface sensible heat flux, while heating of the reef water was primarily due to solar radiation, and thermal conduction and convection from the reef substrate. Heating and cooling processes were more defined during winter due to higher sensible and latent heat fluxes and strong diurnal evolution of the CARL. Sudden increases in water temperature were associated with inundation of warmer oceanic water during the flood tide, particularly in winter due to enhanced nocturnal cooling of water overlying the reef. Similarly, cooling of the water over the reef occurred during the ebb tide as heat was transported off the reef to the surrounding ocean. While these results are the first to shed light on the heat budget of a coral reef and overlying CARL, longer-term, systematic measurements of reef thermal budgets are needed under a range of meteorological and hydrodynamic conditions, and across various reef types to elucidate the influence on larger-scale oceanic and atmospheric processes. This is essential for understanding the role of coral reefs in tropical and sub-tropical meteorology; the physical processes that take place during coral bleaching events, and coral and algal community dynamics on coral reefs.