Hindcast simulations for the period 1902--1998 have been performed using a three-dimensional coupled ice-ocean model for the Baltic Sea. Daily sea level observations in Kattegat, monthly basin-wide discharge data, and reconstructed atmospheric surface data have been used to force the Baltic Sea model. The reconstruction utilizes a statistical model to calculate daily sea level pressure and monthly surface air temperature, dew point temperature, precipitation, and cloud cover fields. Sensitivity experiments have been performed to explore the impact of the freshwater and saltwater inflow variability on the salinity of the Baltic Sea. The decadal variability of the average salinity is explained partly by decadal volume variations of the accumulated freshwater inflow from river runoff and net precipitation and partly by decadal variations of the large-scale sea level pressure over Scandinavia. During the last century two exceptionally long stagnation periods are found, the 1920s to 1930s and the 1980s to 1990s. During these periods, precipitation, runoff, and westerly winds were stronger, and salt transports into the Baltic were smaller than normal. As the response timescale on freshwater forcing of the Baltic Sea is about 35 years, seasonal and year-to-year changes of the freshwater inflow are too short to affect the average salinity significantly. We found that the impact of river regulation, which changes the discharge seasonality, is negligible.