Abstract This study diagnoses the changes in Arctic clouds simulated by the Community Climate System Model version 3 (CCSM3) in a transient 2 × CO2 simulation. Four experiments—one fully coupled and three with prescribed SSTs and/or sea ice cover—are used to identify the mechanisms responsible for the projected cloud changes. The target simulation uses a T42 version of the CCSM3, in which the atmosphere is coupled to a dynamical ocean with mobile sea ice. This simulation is approximated by a T42 atmosphere-only integration using CCSM3’s atmospheric component [the Community Atmosphere Model version 3 (CAM3)] forced at its lower boundary with the changes in both SSTs and sea ice concentration from CCSM3’s 2 × CO2 run. The authors decompose the combined effect of the higher SSTs and reduced sea ice concentration on the Arctic cloud response in this experiment by running two additional CAM3 simulations: one forced with modern SSTs and the projected sea ice cover changes in CCSM3 and the other forced with modern sea ice coverage and the projected changes in SSTs in CCSM3. The results suggest that future increases in Arctic cloudiness simulated by CCSM3 are mostly attributable to two separate processes. Low cloud gains are primarily initiated locally by enhanced evaporation within the Arctic due to reduced sea ice, whereas cloud increases at middle and high levels are mostly driven remotely via greater meridional moisture transport from lower latitudes in a more humid global atmosphere. The enhanced low cloudiness attributable to sea ice loss causes large increases in cloud radiative forcing during the coldest months and therefore promotes even greater surface warming. Because CCSM3’s Arctic cloud response to greenhouse forcing is similar to other GCMs, the driving mechanisms identified here may be applicable to other models and could help to advance our understanding of likely changes in the vertical structure of polar clouds.