A steady decline in Arctic sea ice has been observed over recent decades. General circulation models predict further decreases under increasing greenhouse gas scenarios. Sea ice plays an mportant role in the climate system in that it influences ocean-to-atmosphere fluxes, surface albedo, and ocean buoyancy. The aim of this study is to isolate the climate impacts of a declining Arctic sea ice cover during the current century. The Hadley Centre Atmospheric Model (HadAM3) is forced with observed sea ice from 1980 to 2000 (obtained from satellite passive microwave radiometer data derived with the Bootstrap algorithm) and predicted sea ice reductions until 2100 under one moderate scenario and one severe scenario of ice decline, with a climatological SST field and increasing SSTs. Significant warming of the Arctic occurs during the twenty-first century (mean increase of between 1.6 and 3.9C), with positive anomalies of up to 22C locally. The majority of this is over ocean and limited to high latitudes, in contrast to recent observations of Northern Hemisphere warming. When a climatological SST field is used, statistically significant impacts on climate are only seen in winter, despite prescribing sea ice reductions in all months. When correspondingly increasing SSTs are incorporated, changes in climate are seen in both winter and summer, although the impacts in summer are much smaller. Alterations in atmospheric circulation and precipitation patterns are more widespread than temperature, extending down to midlatitude storm tracks. Results suggest that areas of Arctic land ice may even undergo net accumulation due to increased precipitation that results from loss of sea ice. Intensification of storm tracks implies that parts of Europe may experience higher precipitation rates.