[1] An inverse 3D finite-element ocean circulation model has been designed and used to study variability of the Arctic Ocean circulation in the last 4 decades. We obtained stationary model solutions with the temperature and salinity fields close to the ones given by the Environmental Working Group (EWG) [1998] atlas. Transports at the open boundaries, wind forcing and hydrographic fields are treated as unknowns, which are varied to minimize a quadratic cost function subject to model constraints. The inverse problem is solved for 10 gridded hydrographic data sets that were obtained as winter and summer averages of EWG data over each of the 4 decades (1950s to 1980s) and over the whole period of observations (1948-1993) documented in the atlas. The results show that Arctic circulation in the last 4 decades has undergone significant changes, which manifest themselves in (1) 10% reduction of the ventilation rate in the Atlantic sector of the Arctic Ocean; (2) substantial decrease of the advective heat and freshwater import at the lateral boundaries; (3) spinning down of the cyclonic gyre in the northern Greenland sea, which is partly driven by deep convection; and (4) 3400 km(3) increase of the net fresh water storage, with 75% taking place in the Atlantic sector of the Arctic Ocean. Most of these changes are similar to the ones observed on seasonal transition from winter to summer climatologies, and indicate that the Arctic Ocean is experiencing a shift toward a warmer state