The objectives of the present paper are to formulate and explore a coupled sea ice-ocean model and to examine the sensitivity of ice in the Baltic Sea to climate change. The model treats the Baltic Sea as 13 sub-basins with vertical resolution, horizontally coupled by estuarine circulation and vertically coupled to a sea ice model which includes both dynamic and thermodynamic processes. The reducing effect on the barotropic exchange due to sea ice in the entrance area is also added. The model was first verified with data from 3 test periods representing one mild, one normal and one severe ice winter. The maximum seasonal ice extent was then examined on the basis of simulated and observed data for the period 1980-1993. After that, some climate scenarios (both warm and cold) were examined. The seasonal, regional and interannual variations of sea ice were well described by the model, and the thermal response in the Baltic Sea can be realistically simulated applying forcing data from rather few stations. The Baltic Sea system is highly sensitive to climate change, particularly during the winter season, Warming may drastically decrease the number of winters classified as severe, forcing the climate towards more oceanic conditions. On the other hand, cooling will increase the number of severe winters, forcing the climate towards more sub-arctic conditions.