Observations of the eastern subpolar North Atlantic in the 2010s show exceptional freshening and cooling of the upper ocean, peaking in 2016 with the lowest salinities recorded for 120 years. Published theories for the mechanisms driving the freshening include: reduced transport of saltier, warmer surface waters northwards from the subtropics associated with reduced meridional overturning; shifts in the pathways of fresher, cooler surface water from the Labrador Sea driven by changing patterns of wind stress; and the eastward expansion of the subpolar gyre. Using output from a high-resolution hindcast model simulation, we propose that the primary cause of the exceptional freshening and cooling is reduced surface heat loss in the Labrador Sea. Tracking virtual fluid particles in the model backwards from the eastern subpolar North Atlantic between 1990 and 2020 shows the major cause of the freshening and cooling to be an increased outflow of relatively fresh and cold surface waters from the Labrador Sea; with a minor contribution from reduced transport of warmer, saltier surface water northward from the subtropics. The cooling, but not the freshening, produced by these changing proportions of waters of subpolar and subtropical origin is mitigated by reduced along-track heat loss to the atmosphere in the North Atlantic Current. We analyse modelled boundary exchanges and water mass transformation in the Labrador Sea to show that since 2000, while inflows of lighter surface waters remain steady, the increasing output of these waters is due to reduced surface heat loss in the Labrador Sea beginning in the early 2000s. Tracking particles further upstream reveals that the primary source of the increased volume of lighter water transported out of the Labrador Sea is increased recirculation of water, and therefore longer residence times, in the upper 500–1000 m of the subpolar gyre.