The sensitivity of a regional climate model (RCM) to lateral boundary forcing (by different numerical weather prediction analysis products and by various temperature perturbations) and to the initial conditions is evaluated for a pan-Arctic domain. The study focuses on seasonal simulations over the period of the Surface Heat Budget of the Arctic Ocean project from October 1997 to September 1998. Small perturbations in the initial and/or lateral boundary conditions can make the model diverge from driving large-scale fields, and the extent to which this occurs depends on the control of the model by the lateral boundary forcing, not on the origin of the perturbation. The model response to a perturbation does not depend on the type of perturbation, and it is largely independent of the magnitude as well as of the source of the perturbation. Both small and large temperature perturbations have similar consequences for the monthly mean atmospheric patterns and the root mean square difference, but the model response depends on the season. Two regimes in the internal variability were found: (1) large variability in autumn/winter and (2) smaller variability in summer. The pronounced magnitude of internal variability must be taken into account in discussing the significance of climate change and climate sensitivity signals in Arctic RCMs. © Inter-Research 2004.