Ongoing changes in arousal influence sensory processing and behavioral performance. Yet the circuit-level correlates for this influence remain poorly understood. Here, we investigate how functional interaction between posterior parietal cortex (PPC) and lateral posterior (LP)/Pulvinar is influenced by ongoing fluctuations in pupil-linked arousal, which is a non-invasive measure of neuromodulatory tone in the brain. We find that fluctuations in pupil-linked arousal correlate with changes to PPC to LP/Pulvinar oscillatory interaction, with cortical alpha oscillations driving activity during low arousal states, and LP/Pulvinar driving PPC in the theta frequency band during higher arousal states. Active visual exploration by saccadic eye movements elicits similar transitions in thalamo-cortical interaction. Furthermore, the presentation of naturalistic video stimuli induces thalamo-cortical network states closely resembling epochs of high arousal in the absence of visual input. Thus, neuromodulators may play a role in dynamically sculpting the patterns of thalamo-cortical functional interaction that underlie visual processing.