A high-resolution sea ice model is designed for simulating the Arctic. The grid resolution is ~18 km, and the domain contains the main Arctic Ocean, Nordic Seas, Canadian Archipelago, and the subpolar North Atlantic. The model is based on a widely used dynamic and thermodynamic model with more efficient numerics. The oceanic forcing is from an Arctic Ocean model with the same horizontal resolution as the ice model and 30 levels. The atmospheric forcing is from 3-day average 1990--1994 European Center for Medium-Range Weather Forecasts operational data. Results from the ice model are compared against satellite passive-microwave observations and drifting buoys. The model realistically simulates ice tongues and eddies in the Greenland Sea. The mesoscale ocean eddies along the East Greenland Current (EGC) are demonstrated to be responsible for the presence of ice eddies and tongues out of the Greenland Sea ice edge. Large shear and divergence associated with the mesoscale ice eddies and strong ice drift, such as the one above the EGC, result in thinner and less compact ice. The mesoscale ocean eddies along the Alaskan Chukchi shelf break, the Northwind Ridge, and the Alpha-Mendeleyev Ridge are major contributors to mesoscale reduction of ice concentration, in addition to atmospheric storms which usually lead to a broad-scale reduction of ice concentration. The existence of mesoscale ocean eddies greatly increases nonuniformity of ice motion, which means stronger ice deformation and more open water. An eddy-resolving coupled ice-ocean model is highly recommended to adequately simulate the small but important percentage of open water in the Arctic pack ice, which can significantly change the heat fluxes from ocean to atmosphere and affect the global climate. ¿ 1999 American Geophysical Union