We present revised probability density functions for climate model parameters (effective climate sensitivity, the rate of deep-ocean heat uptake, and the strength of the net aerosol forcing) that are based on climate change observations from the 20th century. First, we compare observed changes in surface, upper-air, and deep-ocean temperature changes against simulations of 20th century climate in which the climate model parameters were systematically varied. The estimated 90% range of effective climate sensitivity is 2–5 K but no corresponding upper bound can be placed on the equilibrium climate sensitivity. The net aerosol forcing strength for the 1980s has 90% bounds of −0.70 to −0.27 W m−2. The rate of deep-ocean heat uptake corresponds to an effective diffusivity, Kv, with a 90% range of 0.04–4.1 cm2 s−1. Second, we estimate the effective climate sensitivity and rate of deep-ocean heat uptake for 11 of the IPCC AR4 AOGCMs. By comparing against the acceptable combinations inferred from the observations, we conclude that the rates of deep-ocean heat uptake for the majority of AOGCMs lie above the observationally based median value. This implies a bias in the predictions inferred from the IPCC models alone.