This paper presents a mechanism of decadal variability in the Artic Ocean--GIN Sea (Greenland, Iceland and Norwegian Seas) atmosphere-ice-ocean system. We hypothesize that Arctic variability is regulated by heat and freshwater exchange between the Arctic Ocean and the GIN Sea. The interaction between basins is weak during anticyclonic circulation regimes (low AO/NAO) and strong during cyclonic circulation regimes (high AO/NAO). Regime shifts are controlled by the system itself through oceanic and atmospheric gradients (dynamic height and surface air temperature) that increase during the anticyclonic regime and decrease during the cyclonic regime. This conceptual mechanism for Arctic decadal variability has been reproduced in a model experiment. Both model results and observational data support the suggested mechanism.