The sensitivity of the upper ocean thermal balance of an ocean-atmosphere coupled GCM to lateral ocean physics is assessed. Three 40-year simulations are performed using horizontal mixing, isopycnal mixing, and isopycnal mixing plus eddy induced advection. The thermal adjustment of the coupled system is quite different between the simulations, confirming the major role of ocean mixing on the heat balance of climate. The initial adjustment phase of the upper ocean (SST) is used to diagnose the physical mechanisms involved in each parametrisation. When the lateral ocean physics is modified, significant changes of SST are seen, mainly in the southern ocean. A heat budget of the annual mixed layer (defined as the “bowl”) shows that these changes are due to a modified heat transfer between the bowl and the ocean interior. This modified heat intake of the ocean interior is directly due to the modified lateral ocean physics. In isopycnal diffusion, this heat exchange, especially marked at mid-latitudes, is both due to an increased effective surface of diffusion and to the sign of the isopycnal gradients of temperature at the base of the bowl. As this gradient is proportional to the isopycnal gradient of salinity, this confirms the strong role of salinity in the thermal balance of the coupled system. The eddy induced advection also leads to increased exchanges between the bowl and the ocean interior. This is both due to the shape of the bowl and again to the existence of a salinity structure. The lateral ocean physics is shown to be a significant contributor to the exchanges between the diabatic and the adiabatic parts of the ocean.