Changes apparent in the arctic climate system in recent years require evaluation in a century-scale perspective in order to assess the Arctic's response to increasing anthropogenic greenhouse-gas forcing. Here, a new set of century- and multidecadal-scale observational data of surface air temperature (SAT) and sea ice is used in combination with ECHAM4 and HadCM3 coupled atmosphere–ice–ocean global model simulations in order to better determine and understand arctic climate variability. We show that two pronounced twentieth-century warming events, both amplified in the Arctic, were linked to sea-ice variability. SAT observations and model simulations indicate that the nature of the arctic warming in the last two decades is distinct from the early twentieth-century warm period. It is suggested strongly that the earlier warming was natural internal climate-system variability, whereas the recent SAT changes are a response to anthropogenic forcing. The area of arctic sea ice is furthermore observed to have decreased ∼8 × 105 km2 (7.4%) in the past quarter century, with record-low summer ice coverage in September 2002. A set of model predictions is used to quantify changes in the ice cover through the twenty-first century, with greater reductions expected in summer than winter. In summer, a predominantly sea-ice-free Arctic is predicted for the end of this century.