Vertical coupling by gravity waves (GWs) between the lower atmosphere and thermosphere is studied with a general circulation model (GCM) extending from the tropopause to the upper atmosphere. A newly developed nonlinear spectral GW parameterization, which accounts for wave propagation in the highly dissipa-tive thermosphere, has been implemented into the Coupled Middle Atmosphere-Thermosphere-2 (CMAT2) GCM. In addition to the nonlinear saturation, the ex-tended scheme considers wave dissipation suitable for the thermosphere-ionosphere, such as molecular viscosity and thermal conduction, ion drag, eddy diffusivity, and radiative damping. The results of simulations for June solstice show that the dynam-ical and thermal effects of GWs are strong and cannot be neglected in the thermo-sphere. At F region heights, GW momentum deposition is comparable to the ion drag and GW-induced heating/cooling competes with the high-latitude Joule heat-ing.