A new intermediate coupled model (ICM) is developed and used to simulate and predict sea surface temperature (SST) variability in the tropical Pacific. The ocean component is based on an intermediate complexity model developed by Keenlyside and Kleeman <2002> that is an extension of the McCreary <1981> baroclinic modal model to include varying stratification and partial nonlinearity effects, allowing realistic simulation of the mean equatorial circulation and its variability. An empirical procedure is developed to parameterize subsurface entrainment temperature (Te) in terms of sea surface pressure (SSP) anomalies. The ocean model is then coupled to a statistical atmospheric model. The coupled system realistically produces interannual variability associated with El Ni¿o. Hindcasts are made during the period 1980--1997 for lead times out to 12 months. Observed SST anomalies are the only field to be incorporated into the coupled system to initialize predictions. Predicted SST anomalies from this model do not show obvious systematic biases. Another striking feature is that the model skill beats persistence at all lead times over the central equatorial Pacific.