Caffeine has been shown to affect both physiological functioning and certain aspects of performance. These effects are typically attributed to a simple increase in general arousal. The present study was based on the theory that the effects of caffeine are actually multidimensional. Specificially, we hypothesized that the drug raises arousal, acts to maintain elevated arousal under conditions otherwise conducive to habituation, and enhances the impact of situational and psychological sources of arousal. Subjects were given caffeine (300 mg) or placebo and white noise or no noise and exposed to a series of pure tones and two Backwards Recall Tasks, one novel, the other repetitive. Electrodermal activity (EDA) and task performance were recorded. Caffeine increased arousal as measured by EDA. It also acted to slow habituation during repetitive stimulation, thus maintaining heightened arousal. Finally, it enhanced the effects of novel stimulation, which also independently raised arousal. These results support a multidimensional theory of caffeine effects and provide some understanding of the popularity of caffeine as a psychotropic agent.