A coupled three-dimensional, time-dependent ice-ocean model is developed and applied in order to reproduce the basin-scale ice and mixed-layer physical properties of Hudson Bay and James Bay, Canada. Models for albedo, evaporation, storms, frazil ice production, and radiation are included. Observed monthly means of winds, temperature, precipitation, runoff, and cloudiness are used to force the model and obtain multiyear, steady state, and non-steady state solutions. The seasonal cycle in sea ice thickness, ice concentration, ocean temperature, and salinity is first reproduced. Then we consider a set of five experiments: (1) a strong westerly event from the North Atlantic Oscillation, (2) a year with anomalously high runoff, (3) regulated runoff from hydroelectric development, (4) high autumn winds, and (5) warm conditions. We find that preconditioning of the ocean for winter, controlled by the heat transfer to the atmosphere and freshwater input rates and also related to the mixed-layer depth attained before freezing, has a strong control over the following ice season. The results show that varying runoff has more of an effect on sea-ice production in southeastern Hudson Bay than do temperature changes associated with the North Atlantic Oscillation but that both have a small effect on the ice cover when compared to the observed interannual variability. Regulated runoff produces a positive sea-ice anomaly during the January-April period which is significant (greater than 10 cm or 10%) in the southeastern part of the bay but less than 1 cm (~1%) on average. We conclude that ~90% of the excess winter runoff remains liquid. No significant delay is computed for breakup dates (less than 3 days in southeastern Hudson Bay and less than 1 day overall). Other controls from the atmosphere are required to explain the natural interannual variability of the ice cover. Summer and autumn winds, and air temperature (which control heat loss and winter preconditioning), spring cloud cover (which controls heat gain), and snow cover (which controls the winter insulation) can explain relatively large changes in the system. Simple climate warming by 2 ¿C produces large impacts in the ice-ocean system, reducing the winter ice volume by over 20%. ¿ 1998 American Geophysical Union