The heat and freshwater budgets of the Nordic seas are computed from atmospheric reanalysis data and ocean observations, mainly taken during the period 1990–1999. The total heat loss is 198 TW and the freshwater gain 52 mSv (1 Sv = 106 m3 s−1), with residuals equal to 1 TW and 3 mSv, respectively. Budgets are also computed for three subregions within the Nordic seas: the Norwegian Sea, the Barents Sea and the Greenland/Iceland Sea. Without accounting for transfer of heat and freshwater across the Arctic Front, which separates the Greenland/Iceland Sea from the Norwegian Sea, the residuals of the heat and freshwater budgets range from −36 TW to 34 TW and from −16 mSv to 19 mSv, respectively. To close the budgets of all subregions cross-frontal fluxes of −35 TW and 17 mSv, caused either by eddy shedding along the Arctic Front or ocean currents not accounted for, must be included. Combined with observations of the average temperature and salinity on both sides of the Arctic Front these values indicate a rate of cross-frontal water exchange of approximately 4 Sv. The most intense water mass modifications occur in the Norwegian Sea, where ocean heat loss and freshwater input are equal to 119 TW and 41 mSv, respectively.