Abstract We study the adjustment of the tropical atmosphere to localized surface heating using a Lagrangian atmospheric model (LAM) that simulates a realistic Madden–Julian oscillation (MJO)—the dominant, eastward-propagating mode of tropical intraseasonal variability modulating atmospheric convection. Idealized warm sea surface temperature (SST) anomalies of different aspect ratios and magnitudes are imposed in the equatorial Indian Ocean during MJO-neutral conditions and then maintained for 15 days. The experiments then continue for several more months. Throughout these experiments, we observe a robust generation of an MJO event, evident in precipitation, velocity, temperature, and moisture fields, which becomes a key element of atmospheric adjustment along with the expected Kelvin and Rossby waves. The MJO circulation pattern gradually builds up during the first week, and then starts to propagate eastward at a speed of 5–7 m s −1 . The upper-level quadrupole circulation characteristic of the MJO becomes evident around day 14, with two anticyclonic gyres generated by the Gill-type response to convective heating and two cyclonic gyres forced by the excited Kelvin waves and extratropical Rossby wave trains. A moisture budget analysis shows that the eastward propagation of the MJO is controlled largely by the anomalous advection of moisture and by the residual between anomalous moisture accumulation due to converging winds and precipitation. The initial MJO event is followed by successive secondary events, maintaining the MJO for several more cycles. Thus, this study highlights the fundamental role that the MJO can play in the adjustment of the moist equatorial atmosphere to localized surface heating.