Coupled ocean atmosphere general circulation models (GCM) are typically coupled once every 24 h, excluding the diurnal cycle from the upper ocean. Previous studies attempting to examine the role of the diurnal cycle of the upper ocean and particularly of diurnal SST variability have used models unable to resolve the processes of interest. In part 1 of this study a high vertical resolution ocean GCM configuration with modified physics was developed that could resolve the diurnal cycle in the upper ocean. In this study it is coupled every 3 h to atmospheric GCM to examine the sensitivity of the mean climate simulation and aspects of its variability to the inclusion of diurnal ocean-atmosphere coupling. The inclusion of the diurnal cycle leads to a tropics wide increase in mean sea surface temperature (SST), with the strongest signal being across the equatorial Pacific where the warming increases from 0.2°C in the central and western Pacific to over 0.3°C in the eastern equatorial Pacific. Much of this warming is shown to be a direct consequence of the rectification of daily mean SST by the diurnal variability of SST. The warming of the equatorial Pacific leads to a redistribution of precipitation from the Inter tropical convergence zone (ITCZ) toward the equator. In the western Pacific there is an increase in precipitation between Papa new guinea and 170°E of up to 1.2 mm/day, improving the simulation compared to climatology. Pacific sub tropical cells are increased in strength by about 10%, in line with results of part 1 of this study, due to the modification of the exchange of momentum between the equatorially divergent Ekman currents and the geostropic convergence at depth, effectively increasing the dynamical response of the tropical Pacific to zonal wind stresses. During the spring relaxation of the Pacific trade winds, a large diurnal cycle of SST increases the seasonal warming of the equatorial Pacific. When the trade winds then re-intensify, the increase in the dynamical response of the ocean leads to a stronger equatorial upwelling. These two processes both lead to stronger seasonal basin scale feedbacks in the coupled system, increasing the strength of the seasonal cycle of the tropical Pacific sector by around 10%. This means that the diurnal cycle in the upper ocean plays a part in the coupled feedbacks between ocean and atmosphere that maintain the basic state and the timing of the seasonal cycle of SST and trade winds in the tropical Pacific. The Madden-Julian Oscillation (MJO) is examined by use of a large scale MJO index, lag correlations and composites of events. The inclusion of the diurnal cycle leads to a reduction in overall MJO activity. Precipitation composites show that the MJO is stronger and more coherent when the diurnal cycle of coupling is resolved, with the propagation and different phases being far more distinct both locally and to larger lead times across the tropical Indo-Pacific. Part one of this study showed that that diurnal variability of SST is modulated by the MJO and therefore increases the intraseasonal SST response to the different phases of the MJO. Precipitation-based composites of SST variability confirm this increase in the coupled simulations. It is argued that including this has increased the thermodynamical coupling of the ocean and atmosphere on the timescale of the MJO (20-100 days), accounting for the improvement in the MJO strength and coherency seen in composites of precipitation and SST. These results show that the diurnal cycle of ocean-atmosphere interaction has profound impact on a range of up-scale variability in the tropical climate and as such, it is an important feature of the modelled climate system which is currently either neglected or poorly resolved in state of the art coupled models.