In the largest global cooling event of the Cenozoic Era, between 33.8 and 33.5Myr ago, warm, high-CO2 conditions gave way to the variable `icehouse' climates that prevail today. Despite intense study, the history of cooling versus ice-sheet growth and sea-level fall reconstructed from oxygen isotope values in marine sediments at the transition has not been resolved. Here, we analyse oxygen isotopes and Mg/Ca ratios of benthic foraminifera, and integrate the results with the stratigraphic record of sea-level change across the Eocene-Oligocene transition from a continental-shelf site at Saint Stephens Quarry, Alabama. Comparisons with deep-sea (Sites 522 (South Atlantic) and 1218 (Pacific)) δ18O and Mg/Ca records enable us to reconstruct temperature, ice-volume and sea-level changes across the climate transition. Our records show that the transition occurred in at least three distinct steps, with an increasing influence of ice volume on the oxygen isotope record as the transition progressed. By the early Oligocene, ice sheets were ~25% larger than present. This growth was associated with a relative sea-level decrease of approximately 105m, which equates to a 67m eustatic fall.