Dramatic changes in the circulation of sea ice and the upper layers of the Arctic Ocean have been reported during the last decade. Similar variability is modeled using a regional, coupled ice-ocean model. Realistic atmospheric forcing fields for 1979--93 are the only interannual signal prescribed in the model. Our results show large-scale changes in sea ice and oceanic conditions when comparing results for the late 1970s/early 1980s and the 1990s. We hypothesize that these changes are in response to even larger scale atmospheric variability in the Northern Hemisphere that can be defined as either the Arctic Oscillation or the North Atlantic Oscillation. Agreement between the direction and scale of change in the model and observations, in the absence of interannual forcing from the global ocean thermohaline circulation, suggests that the atmospheric variability by itself is sufficient to produce basin-scale changes in the Arctic Ocean and sea ice system. ¿ 2000 American Geophysical Union