A time dependent two-dimensional ice-ocean coupled thermodynamic model is developed to study the ice edge advance and retreat, development of the oceanic mixed layer, and oceanic response to ice movement, ice melt, and heat balance in the Newfoundland marginal ice zone. The model domain is a vertical section of the ocean along the direction of the ice velocity. Initially, the ocean is free of ice and has a deep mixed layer formed by winter surface cooling. An ice sheet then moves into the domain from the upstream boundary at constant velocity. It melts from the bottom and a shallow mixed layer beneath the ice is developed. Heat and buoyancy fluxes at the air-sea and ice-water interfaces and at the bottom of the mixed layer determine the melt rate and change of the mixed layer properties. The ice edge reaches a maximum distance and starts to retreat when the ice is being melted by the warm water faster than it is being advected into the area. The oceanic properties change with the ice movement. During the advancing phase of the ice movement, the heat loss to the ice bottom from ice melting exceeds the heat gain by surface heating and entrainment, causing the mixed layer temperature to drop. But since the buoyancy created by the melting is not sufficient to overcome the effect of wind mixing, the mixed layer deepens rapidly. During the retreating phase, the mixed layer becomes shallower and warmer because of the increasing surface heating and buoyance production by ice melting. The most important factors controlling the melt rate and the excursion distance are the air temperature and the ambient water temperature. Higher wind speeds increase the mixed layer depth but do not have a strong effect on the melt rate. ¿1991 American Geophysical Union