We investigated the influence of rainfall patterns on the water-use efficiency of wheat in a transect between Horsham (36°S) and Emerald (23°S) in eastern Australia. Water-use efficiency was defined in terms of biomass and transpiration, WUE_B/T, and grain yield and evapotranspiration, WUE_Y/ET. Our working hypothesis is that latitudinal trends in WUE_Y/ET of water-limited crops are the complex result of southward increasing WUE_B/T and soil evaporation, and season-dependent trends in harvest index. Our approach included: (a) analysis of long-term records to establish latitudinal gradients of amount, seasonality, and size-structure of rainfall; and (b) modelling wheat development, growth, yield, water budget components, and derived variables including WUE_B/T and WUE_Y/ET. Annual median rainfall declined from around 600 mm in northern locations to 380 mm in the south. Median seasonal rain (from sowing to harvest) doubled between Emerald and Horsham, whereas median off-season rainfall (harvest to sowing) ranged from 460 mm at Emerald to 156 mm at Horsham. The contribution of small events (≤ 5 mm) to seasonal rainfall was negligible at Emerald (median 15 mm) and substantial at Horsham (105 mm). Power law coefficients (τ), i.e. the slopes of the regression between size and number of events in a log-log scale, captured the latitudinal gradient characterised by an increasing dominance of small events from north to south during the growing season. Median modelled WUE_B/T increased from 46 kg/ha.mm at Emerald to 73 kg/ha.mm at Horsham, in response to decreasing atmospheric demand. Median modelled soil evaporation during the growing season increased from 70 mm at Emerald to 172 mm at Horsham. This was explained by the size-structure of rainfall characterised with parameter τ, rather than by the total amount of rainfall. Median modelled harvest index ranged from 0.25 to 0.34 across locations, and had a season-dependent latitudinal pattern, i.e. it was greater in northern locations in dry seasons in association with wetter soil profiles at sowing. There was a season-dependent latitudinal pattern in modelled WUE_Y/ET. In drier seasons, high soil evaporation driven by a very strong dominance of small events, and lower harvest index override the putative advantage of low atmospheric demand and associated higher WUE_B/T in southern locations, hence the significant southwards decrease in WUE_Y/ET. In wetter seasons, when large events contribute a significant proportion of seasonal rain, higher WUE_B/T in southern locations may translate into high WUE_Y/ET. Linear boundary functions (French-Schultz type models) accounting for latitudinal gradients in its parameters, slope, and x-intercept, were fitted to scatter-plots of modelled yield v. evapotranspiration. The x-intercept of the model is re-interpreted in terms of rainfall size structure, and the slope or efficiency multiplier is described in terms of the radiation, temperature, and air humidity properties of the environment. Implications for crop management and breeding are discussed.