<p>Annual deformation signals recorded by vault-housed extensometers remain poorly understood despite their prevalence in crustal dynamics research. Many observatories in mainland China report pronounced annual strain variations, yet their physical origin has rarely been quantified. Here this study systematically analyzes data from the Kuancheng Geodynamic Observatory (KGO), North China, to test whether annual air temperature variations drive these signals. Using a half-space thermoelastic model overlain by a thin unconsolidated layer, we show that the observed annual temperature cycle (amplitude 16.8 °C) can generate thermoelastic strains on the order of 10⁻⁷ at 30 m depth. Modeled amplitudes and phases agree closely with observed North–South and East–West strain components, strongly indicating that temperature-induced thermoelastic deformation is the primary source of annual strain at KGO. These findings provide a quantitative framework for interpreting annual signals in China’s extensometer network and highlight the need to separate temperature-driven annual strain variations from potential earthquake precursor signals.</p>