To establish how well the new Community Climate System Model, version 4 (CCSM4) simulates the properties of the Arctic sea ice and ocean, results from six CCSM4 twentieth-century ensemble simulations are compared here with the available data. It is found that the CCSM4 simulations capture most of the important climatological features of the Arctic sea ice and ocean state well, among them the sea ice thickness distribution, fraction of multiyear sea ice, and sea ice edge. The strongest bias exists in the simulated spring-to-fall sea ice motion field, the location of the Beaufort Gyre, and the temperature of the deep Arctic Ocean (below 250 m), which are caused by deficiencies in the simulation of the Arctic sea level pressure field and the lack of deep-water formation on the Arctic shelves. The observed decrease in the sea ice extent and the multiyear ice cover is well captured by the CCSM4. It is important to note, however, that the temporal evolution of the simulated Arctic sea ice cover over the satellite era is strongly influenced by internal variability. For example, while one ensemble member shows an even larger decrease in the sea ice extent over 1981–2005 than that observed, two ensemble members show no statistically significant trend over the same period. It is therefore important to compare the observed sea ice extent trend not just with the ensemble mean or a multimodel ensemble mean, but also with individual ensemble members, because of the strong imprint of internal variability on these relatively short trends.