The combined application of the MBT (degree of methylation) and CBT (degree of cyclization) indices, based on the distribution of branched glycerol dialkyl glycerol tetraethers (brGDGTs) in soils, has been proposed as a paleoproxy to estimate mean annual temperature (MAT). CBT quantifies the degree of cyclization of brGDGTs and relates to soil pH. MBT and the simplified version MBT' quantify the degree of methylation of brGDGTs and relate to MAT and soil pH. However, other factors such as soil water availability have also been suggested to influence MBT' and possibly restrict the combined application of the MBT' and CBT indices as a paleotemperature proxy. To assess the effect of hydrological conditions on MBT' and CBT, a set of 23 Iberian Peninsula soil samples, covering a MAT range from 10 to 18 °C and a mean annual precipitation (MAP) range of 405 mm to 1455 mm, was analyzed. We found that the CBT was indeed significantly correlated with soil pH in our sample set. In contrast, MBT' was not correlated with MAT but had a significant correlation with the aridity index (AI), a parameter related to water availability in soils. The AI can explain 50% of the variation of the MBT', and 70% of the residuals of MAT estimated with the MBT/CBT proxy as compared to instrumentally measured MAT. We propose that, in arid settings, where water may be an ecologically limiting factor, MBT' is influenced by hydrological conditions rather than temperature. Thus, our results suggest that the combination of MBT' and CBT indices should be applied with caution in paleotemperature reconstructions in soils from dry subhumid to hyperarid environments. copyright © Author(s) 2014.