Eddy driven recirculation of Atlantic Water (AW) in the Fram Strait modifies the amount of heat that reaches the Arctic Ocean, but is difficult to constrain in ocean models due to very small Rossby radius there. In this study, we explore the effect of resolved eddies on the AW circulation in a locally eddy-resolving simulation of the global Finite-Element-Sea ice-Ocean Model (FESOM) integrated for the years 2000–2009, by focusing on the seasonal cycle. An eddy-permitting simulation serves as a control run. Our results suggest that resolving local eddy dynamics is critical to realistically simulate ocean dynamics in the Fram Strait. Strong eddy activity simulated by the eddy-resolving model, with peak in winter and lower values in summer, is comparable in magnitude and seasonal cycle to observations from a long-term mooring array, whereas the eddy-permitting simulation underestimates the observed magnitude. Furthermore, a strong cold bias in the central Fram Strait present in the eddy-permitting simulation is reduced due to resolved eddy dynamics, and AW transport into the Arctic Ocean is increased with possible implications for the Arctic Ocean heat budget. Given the good agreement between the eddy-resolving model and measurements, it can help filling gaps that point-wise observations inevitably leave. For example, the path of the West Spitsbergen Current offshore branch, measured in the winter months by the mooring array, is shown to continue cyclonically around the Molloy Deep in the model, representing the major AW recirculation branch in this season.