The interaction between a tropical cyclone (TC) and the underlying ocean is investigated using an atmosphere-ocean coupled model. The atmospheric model is developed from the Pennsylvania State University (Penn State)-National Center for Atmospheric Research (NCAR) mesoscale model version 4 MM4 and the ocean model consists of a mixed layer and an inactive stagnant layer beneath. Coupling between the atmosphere and the ocean models is achieved through wind stress and surface heat and moisture fluxes that depend on the sea surface temperature (SST). In the absence of a background flow, the atmospheric component consists of only a predefined vortex with an initial central pressure and the radius of the 15 m s-1 wind. The basic control experiments demonstrate that the coupled model can simulate the development of a TC and its interaction with the ocean. Changes in TC intensity are sensitive to those of SST and the response is almost instantaneous. An SST of ∼27°C is found to be the threshold for TC development. In addition, the initial depth of the ocean mixed layer has an appreciable effect on TC intensity, which also depends on the movement of the TC. Furthermore, the vertical structure of ocean (vertical temperature gradient in the stagnant layer and temperature differential between the two layers) plays a significant role in modulating TC intensity. In the presence of a warm core eddy (WCE), a TC intensifies before its center reaches the edge of the WCE. Although the TC attains maximum intensity at the center of the WCE, it does not weaken to its original intensity after leaving the WCE. During the entire passage of the TC, the SST at the center of the WCE decreases by about only 1°C, and the WCE generally maintains its original characteristics. However, two cold pools are observed around its periphery. A similar intensification process occurs when a TC moves over a sharp SST gradient and a locally deep ocean mixed layer. These results are explained by the interaction between the ocean and the TC circulation as well as the change in the total surface heat flux.