The paleoclimatic effects of the closure of the Isthmus of Panama ∼3 Ma are investigated using a coupled atmosphere-ocean model. Consistent with earlier ocean-only modelling studies, it is shown that prior to closure there is an absence of deep water formation in the North Atlantic. Hence there is a reduction in oceanic heat transport. This is largely compensated for by the atmosphere such that only small changes in total planetary heat transport occur. The model climate of the North Atlantic is significantly warmer after Isthmus closure. In addition, the regions surrounding the Pacific Ocean and South Atlantic are generally cooler while the Indian Ocean is generally warmer in the model present-day climate. Finally, possible relationships to glaciation and initiation of northern hemisphere glacial cycles are discussed.