Determining the genetic basis of environmental adaptation is a central problem of evolutionary biology. This issue has been fruitfully addressed by examining genetic differentiation between populations that are recently separated and/or experience high rates of gene flow. A good example of this approach is the decades-long investigation of selection acting along latitudinal clines in Drosophila melanogaster. Here we use next-generation genome sequencing to reexamine the well-studied Australian D. melanogaster cline. We find evidence for extensive differentiation between temperate and tropical populations, with regulatory regions and unannotated regions showing particularly high levels of differentiation. Although the physical genomic scale of geographic differentiation is small--on the order of gene sized--we observed several larger highly differentiated regions. The region spanned by the cosmopolitan inversion polymorphism In(3R)P shows higher levels of differentiation, consistent with the major difference in allele frequencies of Standard and In(3R)P karyotypes in temperate vs. tropical Australian populations. Our analysis reveals evidence for spatially varying selection on a number of key biological processes, suggesting fundamental biological differences between flies from these two geographic regions.