An understanding of physiological sensitivity to temperature and its variability is important for predicting habitat suitability for disease vectors under different climatic regimes. In this study, we characterized the thermal sensitivity of larval developmental rates and survival in several Australian mainland populations of the dengue virus vector Aedes aegypti. Males developed more rapidly than females, but there were no differences among populations for development time or survival despite previously demonstrated genetic differentiation for neutral markers. Optimal development and survival temperatures were 37°C and 25°C, respectively. The values for maximal development and survival were similar to standard functions used in the container inhabiting simulation (CIMSIM) model for predicting population dynamics of Ae. aegypti populations, but CIMSIM assumed a lower optimal temperature. Heat stress experiments indicated that larvae could withstand water temperatures up to 44°C regardless of the rate at which temperature was increased. Results from development time measured under constant temperatures could predict development time under fluctuating conditions, whereas CIMSIM predicted faster rates of development. This difference acts to reduce the predicted potential number of generations of Ae. aegypti per year in Australia, although it does not influence its predicted distribution, which depends critically on the nature of the aquatic breeding sites.