Ice-wedges are periglacial landforms that develop as a result of thermal contraction-cracking in continuous permafrost regions, which appear as polygonal networks on the ground surface. Given their complex thermo-mechanical loading history, very few related numerical models have so far been developed. In this study, 2-D eXtended finite element simulations are employed to represent the formation process of ice-wedges and to investigate the effect of select environmental controls on crack initiation and growth. Seventeen combinations of soil type and temperature–time series are used in four case studies addressing model testing, the permafrost stress regime, the freezing volumetric expansion of porewater, and a new remeshing process introduced to simulate ice-wedge growth over multiple years. The model testing shows good agreement with field observations from the Arctic and demonstrates the ability of the modelling procedure to reproduce the salient features of thermal contraction-cracking. The permafrost stress regime is found to be strongly affected by soil type and climate, with coarse-grained soils and cold climates leading to higher tensile stresses than fine-grained soils and warm climates. Higher tensile stress are also predicted for saturated soils due to the freezing volumetric expansion of porewater.