Abstract In recent decades, the Arctic minimum sea ice extent has transitioned from a predominantly thick multiyear ice cover to a thinner seasonal ice cover. We partition the total (observed) Arctic summer area loss into thermodynamic and dynamic (convergence, ridging, and export) sea ice area loss during the satellite era from 1979 to 2021 using a Lagrangian sea ice tracking model driven by satellite-derived sea ice velocities. Results show that the thermodynamic signal dominates the total summer ice area loss and the dynamic signal remains small (∼20%) even in 2007 when dynamic loss was largest. Sea ice loss by compaction (within pack ice convergence) dominates the dynamic area loss, even in years when the export is largest. Results from a simple (Ekman) free-drift sea ice model, supported by results from the Lagrangian model, suggest that nonlinear effects between dynamic and thermodynamic area loss can be important for large negative anomalies in sea ice extent, in accord with previous modeling studies. A detailed analysis of two all-time record minimum years (2007 and 2012)—one with a semipermanent high in the southern Beaufort Sea and the other with a short-lived but extreme storm in the Pacific sector of the Arctic in late summer—shows that compaction by Ekman convergence together with large thermodynamic melt in the marginal ice zone dominated the sea ice area loss in 2007 whereas, in 2012, it was dominated by Ekman divergence amplified by sea–ice albedo feedback—together with an early melt onset. We argue that Ekman divergence from more intense summer storms when the sun is high above the horizon is a more likely mechanism for a “first-time” ice-free Arctic.