This work reports on the evolution of water masses within the southern portion of the Middle-Atlantic Bight (MAB) and their exchange with the slope waters based upon the Ocean Margins Program hydrographic dataset (February–October 1996). Water mass distributions were quantified in terms of their content of freshwater and of Gulf Stream Water, with the Cold Pool Water (CPW) as the core shelf water. The CPW entered the area during the early spring, migrated offshore during the early summer and disappeared by early fall. An analysis of the salt and heat balance was estimated from the observed data, extended over an annual cycle. Surface heat and evaporative exchanges were obtained using an atmospheric Eta-coordinate model. This analysis supported the concept that the southernmost portion of the MAB circulates more as a positive estuary, exchanging with the slope waters, than as a shelf conduit exporting MAB waters to the Southern Atlantic Bight. Thus, the primary disposition of the shelf waters, entering the SMAB from the north, is in an offshore surface flow. This offshore flow requires, in turn, a sub-surface onshore flow. Significantly, the type of estuarine circulation switches during the year. During the stratified period, the circulation was analogous to that of a ‘highly stratified’ estuary; during the unstratified period, it resembled that of a ‘well-mixed’ estuary. The important difference between these two modes is that the winter exchange is enhanced, relative to that during the summer period; for example, the offshore flow increased from 2.8 to 3.4 10 5 m s −1 and the onshore flow from 0.44 to 1.0 10 5 m s −1, respectively. It is suggested that the enhanced exchange is linked to the reduced density gradients, in both the vertical and horizontal, characteristic of the winter convective season. The slower exchange during summer favored freshwater retention in the SMAB volume, with salinities decreasing by 2 psu over the period; the shorter, more intense exchange during the winter favored freshwater loss (salting). In addition to providing salt, the onshore flow brought enough heat to dominate the heat budgets; for example, the advective heat gain increased from 46 to 135 W m −2, between the summer and winter periods. With regard to the OMP objectives, these results suggest a significantly enhanced potential for carbon loss off the shelf during the winter period, compared to that of summer.