A modified version of the two-level atmospheric general circulation model has been developed and used in the simulation of January and July global climates. The overall physical and numerical formulation of this Oregon State University (OSU) model is the same as that described previously by Gates and Schlesinger (1977), but in the new version water vapor at the upper level has been made a prognostic variable, the parameterizations of cumulus convection, large-scale condensation and evaporation, clouds and radiative-transfer have been changed, the surface snow mass and ground temperature have been made prognostic variables, and the treatment of the surface boundary layer has been revised. Modifications have also been made in the numerical solution procedure (which have increased the model’s speed by nearly a factor of 2), and in the prescribed distributions of topography, sea surface temperature and sea ice. The surface albedo is now a function of the prescribed surface type and of the predicted surface snow cover. The model simulates most features of the large-scale distributions of observed January and July climate more accurately than before, including the primary variables of pressure, temperature, wind, cloudiness and precipitation. In addition, the simulated meridional transports of zonal momentum, heat and water vapor are closer to those observed than heretofore, as are the elements of the associated heat and hydrologic balances. The energy cycle is also simulated with greater accuracy, although the zonal potential and kinetic energies are still somewhat overestimated by the model while the eddy kinetic energy is underestimated. The markedly improved simulations of precipitation, evaporation, 400 mb temperature and surface sensible heat flux in the tropics are shown to be due to the revisions in the new model’s boundary-layer parameterization.