Oil production in Arctic ice-covered areas poses a risk for pollution of the ecosystem including that within the brine channel network of sea ice. Sea-ice autotrophs contribute substantially to Arctic primary production, but are inherently difficult to test for oil exposure responses in situ. This study had two objectives, first, we developed a suitable lab-based mesocosm system, second, we tested oil effects on sea-ice algae. Specifically, we investigated if Alaska North Slope crude oil exposure reduces ice algal abundance, biomass and concentration of extracellular polymeric substances (EPS) using indoor ice tanks over a 10-day exposure period. Six tanks in one cold room were used in pairs for the following treatments: (1) control, (2) oil release as a layer under ice and (3) release of dispersed oil. All tanks were inoculated with sea-ice microbial communities collected from Utqiaġvik, Alaska. After 10 days of exposure, the abundance of algae, dominated by the pennate diatom genus Nitzschia, and the concentrations of EPS and chlorophyll a were significantly lower in the oiled treatments compared to the control. We suggest light attenuation by the oil, reduced algal mobility, and oil toxicity as causes for this reduction. Observed changes in cell fluorescence characteristics based on DNA staining could be linked to the oil exposure and could provide a new tool for assessment of toxicity in microalgae.