A high-resolution coupled ice-ocean model, forced with 1983--1997 European Center for Medium-Range Weather Forecasts data, is used to explore recent Arctic change. In response to changes in atmospheric circulation, stronger cyclonic circulation is present in Arctic sea ice and upper ocean in the late 1980s and early 1990s as compared to the early 1980s, manifested as the weakening of the Beaufort Gyre and the shifting of the Transpolar Drift Stream. Corroborating previous studies, ice divergence in the central Arctic Ocean is highly correlated with surface atmospheric vorticity in summer, suggesting that summer atmospheric circulation is more important than winter for inducing interannual variability of the central Arctic ice divergence and growth rate. The weakening of the summer atmospheric cyclonic circulation from the earlier period to the later period over the Canadian Basin leads to decreased ice divergence there, which then has significant impact on the ice growth rate by reducing ice formation in fall and winter. For the 15 year period, variability in the spatial distribution of ice concentration and thickness is largely determined by the ice dynamics, which is dominated by the atmospheric circulation, except over the Greenland and Labrador Seas, where the ice thermodynamics plays a more important role. The model simulation supports the recent observations of increased presence of Atlantic Water in the Arctic Ocean. The spatial pattern of warming and salinization of the Arctic Atlantic layer follows the pathways of the strengthened boundary currents along the continental slopes and over the ridges, thereby slowly spreading more Atlantic Water downstream from the eastern Arctic into the western Arctic. The integrations with and without surface temperature restoring indicate that the restoring leads to a warmer ocean surface temperature. However, the restoring has little impact on its interannual variability for the 15 year period. ¿ 2001 American Geophysical Union