[1] Kinematic and thermodynamic approaches are employed to diagnose the timedependent transformation, formation, and subduction rates of upper Southern Ocean waters in a multidecadal simulation within an eddy-permitting coupled climate model. In the Subantarctic Mode Water (SAMW) density class, a convergence of diapycnal volume fluxes leads to the formation and inflation of mixed layer waters during winter. A portion of this water is detrained into the pycnocline during early spring, when surface heating restratifies the deep winter mixed layer. The annually averaged subduction rate of SAMW shows pronounced interannual variability, partly controlled by the temporal tendency of the winter mixed layer depth from one year to the next. No significant correlation between the Southern Annular Mode (SAM) and the isopycnally integrated SAMW subduction rate is apparent. However, Ekman downwelling/upwelling intensities modulated by the SAM influence interannual variations in the subduction rates of water masses lighter and heavier than SAMW with an opposing sign: during positive phases of the SAM, more pycnocline waters are entrained into the mixed layer and transformed into lighter densities within the Antarctic Intermediate Water density class, whereas more mixed layer waters are subducted into the pycnocline within the Subtropical Mode Water density class. Such distinct responses of upper Southern Ocean water masses to the SAM are qualitatively consistent with observational constraints. Based on a comparison between offline kinematic and thermodynamic diagnostics, we infer that diapycnal mixing within the mixed layer may contribute up to 50% of the formation rate of SAMW on interannual timescales.