An atmospheric model incorporating energy and moisture balance equations is developed for use in process studies of the climate system. Given the sea surface temperature and specified surface wind field, the atmospheric model calculates the surface fields of air temperature, specific humidity, as well as heat and freshwater fluxes. The inclusion of the moisture balance in the atmospheric model allows the effects of latent heat transport to be included explicitly in the model. Under fixed climatological sea surface temperature (SST) and surface wind conditions, surface air temperatures, specific humidities, and surface fluxes are comparable to direct estimates. Precipitation compares less favorably with observations. As an extension to the climatological forcing case, we conduct a simple perturbation experiment in which the 1955--1959 pentad is compared to the 1970--1974 pentad by driving the model under the respective SST fields. The model exhibits a global air temperature decrease in the latter pentad of 0.27 ¿C (comparable to direct estimates) with cooling in the northern hemisphere and warming in the southern hemisphere. Such large-scale cooling in our atmospheric model is driven by equivalent local changes in the prescribed SST fields, subsequently smoothed by atmospheric diffusion of heat. The interpentadal modeled differences are shown to be quite robust through model experiments using parameters representative of several different unrealistic climatologies. The resulting interpentadal difference fields change remarkably little even when the background state has changed dramatically. This emphasizes the almost linear response of the atmospheric model to the imposed SST changes. The atmospheric model is also coupled to an ocean general circulation model without the need for flux adjustments. This coupled climate model faithfully represents deep water formation in the North Atlantic and Southern Ocean, with upwelling throughout the Pacific and Indian Oceans. Water mass characteristics in the vertical compare very favorably with direct observations. ¿ American Geophysical Union 1996