Seismic reflection profiles across Mesozoic basins in easternmost Australia show that the Esk Trough, Ipswich Basin and Clarence-Moreton Basin were initiated by transtensional events in the Late Permian or Early Triassic. The initial sediments in the basins are unexposed sequences below the Esk Trough and Ipswich Basin. In the Scythian, strike-slip faulting moved eastwards to the site of the present Ipswich Basin, and the Esk Trough subsided due to thermal relaxation. After oblique extension ceased in the Carnian, thermal relaxation subsidence led to deposition of sediments firstly in the Ipswich Basin and then in the more extensive Clarence-Moreton Basin. The structures and sediments of the extension and thermal relaxation phases show a pronounced asymmetry in cross-section, as expected during pure extension, but no low-angle detachment faults have been detected indicating strike-slip movement on the bounding fault of the Esk Trough (the West Ipswich Fault) during extension. Thus the basins developed during a period of transtension (oblique extension) associated with major strike-slip faults in the Early Mesozoic.