Radiocarbon dates and marine tephra suggest that the upper 10 m of core MD99-2274 off North Iceland extends from ∼0 to ∼65 ka BP. A multi-proxy sediment and biomarker study at a ∼0.5 ky resolution is used to derive a paleoclimate scenario for this area of the southwestern Nordic Seas, which during the Holocene had intermittent excursions of icebergs and a seasonal cover of drifting sea ice across the site. The sortable silt mean size (S̅S̅) suggests a bottom current (1000 m depth) flow speed maximum to minimum range of ∼8 cm/s during Marine Isotope Stages 2–3, but the data are unreliable for the Holocene. Slow-down in flow speeds may be associated with massive ice and water discharges linked to the Hudson Strait ice stream (H-events) and to melt of icebergs from Greenland in the Nordic seas where convection would have been suppressed. Five pulses of sediment with a distinct felsic component are associated with iceberg transport from E/NE Greenland. Sea ice, open water and sea surface temperature (SST) biomarker proxies (i.e. IP25, HBI III, brassicasterol and alkenones) all point towards near-perennial sea ice cover during MIS 3 and 2, rather than seasonal sea ice or open water conditions. Indeed, our biomarker and sediment data require that the seas north of Iceland experienced a nearly continuous cover of sea ice, together with icebergs calved from ice stream termini, which drifted southward. The cross-correlation of the quartz % records between MD99-2274 and the well-dated core PS2644 in Blosseville Basin indicates significant coherence in the records at a multi-millennial (∼8 ky) timescale. A transition to open ocean conditions is evident from the early Holocene onwards, albeit with the occurrence of some drift ice and icebergs.