An idealized eddy-resolving numerical model and an analytic three-layer model are used to develop ideas about what controls the circulation of Atlantic Water in the Arctic Ocean. The numerical model is forced with a surface heat flux, uniform winds, and a source of low-salinity water near the surface around the perimeter of an Arctic basin. Despite this idealized configuration, the model is able to reproduce many general aspects of the Arctic Ocean circulation and hydrography, including exchange through Fram Strait, circulation of Atlantic Water, a halocline, ice cover and transport, surface heat flux, and a Beaufort Gyre. The analytic model depends on a nondimensional number, and provides theoretical estimates of the halocline depth, stratification, freshwater content, and baroclinic shear in the boundary current. An empirical relationship between freshwater content and sea surface height allows for a prediction of the transport of Atlantic Water in the cyclonic boundary current. Parameters typical of the Arctic Ocean produce a cyclonic boundary current of Atlantic Water of O(1 ? 2 Sv; where 1 Sv ? 106 m3 s?1) and a halocline depth of O(200 m), in reasonable agreement with observations. The theory compares well with a series of numerical model calculations in which mixing and environmental parameters are varied, thus lending credibility to the dynamics of the analytic model. In these models, lateral eddy fluxes from the boundary and vertical diffusion in the interior are important drivers of the halocline and the circulation of Atlantic Water in the Arctic Ocean.