Abstract The dense network of the Surface Heat Budget of the Arctic (SHEBA) observations is used to assess relationships between winter surface and atmospheric variables as the SHEBA site came under the influence of cyclonic and anticyclonic atmospheric circulation systems. Two distinct and preferred states of subsurface, surface, atmosphere, and clouds occur during the SHEBA winter, extending from the oceanic mixed layer through the troposphere and preceded by same-sign variations in the stratosphere. These states are apparent in distributions of surface temperature, sensible heat and longwave radiation fluxes, ocean heat conduction, cloud-base height and temperature, and in the atmospheric humidity and temperature structure. Surface and atmosphere are in radiative–turbulent–conductive near-equilibrium during a warm opaquely cloudy-sky state, which persists up to 10 days and usually occurs during the low surface pressure phase of a baroclinic wave, although occasionally occurs during the high surface pressure phase because of low, scattered clouds. Clouds occurring in this state have near-unity emissivity and the lowest bases in the vicinity of, or below, the temperature inversion peak. A cold radiatively clear-sky state persists up to two weeks, and occurs only in the high surface pressure phase of a baroclinic wave. The radiatively clear state has clouds that are too tenuous when surface based or, irrespective of opacity, located too far aloft to contribute significantly to the surface energy budget. There is a 13-K surface temperature difference between the two states, and atmospheric inversion peak temperatures are linearly related to the surface temperature in both states. The snow–sea ice interface temperature oscillates over the course of the winter season, as it cools during the radiatively clear state and is warmed from atmospheric emission above and ocean heat conduction from below during the opaquely cloudy state. Analysis of satellite data over the Arctic from 70°–90°N indicates that the radiatively clear and opaquely cloudy states observed at SHEBA may be representative of the entire Arctic basin. The results suggest that model formulation inadequacies should be easier to diagnose if modeled energy transfers are compared with observations using process-based metrics that acknowledge the bimodal nature of the Arctic ocean–ice–snow–atmosphere column, rather than monthly and regionally averaged quantities. Climate change projections of thinner Arctic sea ice and larger advective water vapor influxes into the Arctic could yield different frequencies of occupation of the radiatively clear and opaquely cloudy states and higher wintertime temperatures of SHEBA ocean, ice, snow, atmosphere, and clouds—in particular, a wintertime warming of the snow–sea ice interface temperature.