Little was known about the environmental history of the Arctic Ocean before the 2004 ACEX ocean drilling expedition. Now a 430-metre sea floor sediment core has been recovered and its analysis, reported this week, provides a 56-million-year climate record spanning the transition from a warm 'greenhouse' to a colder 'icehouse' world. Several key events are identified during the Cenozoic: surface waters during the Palaeocene/Eocene thermal maximum (55 million years ago) were much warmer than previous estimates; surface-water freshening confirms an intensified hydrological cycle about 49 million years ago; and the first ice-rafted debris occurred 45 million years ago, 35 million years earlier than was thought. The revised timings for the earliest Arctic cooling events coincide with those for Antarctica, supporting suggestions that global climate changed symmetrically about the poles. A core of sediments taken from underneath the Arctic Ocean provides evidence that ocean conditions could support a free-floating fern, Azolla, during the middle Eocene epoch, roughly 50 million years ago. It has been suggested, on the basis of modern hydrology and fully coupled palaeoclimate simulations, that the warm greenhouse conditions1 that characterized the early Palaeogene period (55–45 Myr ago) probably induced an intensified hydrological cycle2 with precipitation exceeding evaporation at high latitudes3. Little field evidence, however, has been available to constrain oceanic conditions in the Arctic during this period. Here we analyse Palaeogene sediments obtained during the Arctic Coring Expedition, showing that large quantities of the free-floating fern Azolla grew and reproduced in the Arctic Ocean by the onset of the middle Eocene epoch (∼50 Myr ago). The Azolla and accompanying abundant freshwater organic and siliceous microfossils indicate an episodic freshening of Arctic surface waters during an ∼800,000-year interval. The abundant remains of Azolla that characterize basal middle Eocene marine deposits of all Nordic seas4,5,6,7 probably represent transported assemblages resulting from freshwater spills from the Arctic Ocean that reached as far south as the North Sea8. The termination of the Azolla phase in the Arctic coincides with a local sea surface temperature rise from ∼10 °C to 13 °C, pointing to simultaneous increases in salt and heat supply owing to the influx of waters from adjacent oceans. We suggest that onset and termination of the Azolla phase depended on the degree of oceanic exchange between Arctic Ocean and adjacent seas.