We describe a variational bias-correction system for satellite sea-surface temperature (SST) data that includes the use of "observations-of-bias". The bias-correction scheme is designed to work in the historical period, when good quality low-bias reference data were scarce, but can also take advantage of reference data when they are available. In testing with a simple Lorenz 63 model, our new scheme outperformed traditional variational bias correction. When compared with an offline bias-correction method, the new scheme showed superior performance both when the bias was large and when reference observations were sparse. The bias-correction scheme has also been tested using a three-year assimilative run (2008-2010) of the Nucleus for European Modeling of the Ocean (NEMO) ocean general circulation model, with reference data from the Advanced Along Track Scanning Radiometer (AATSR) instrument withheld in 2009. In these tests, the new scheme was found to be more robust to missing reference observations than an offline scheme. Against AATSR data, the new bias-correction method had lower biases and root-mean-square (RMS) errors than an offline scheme, but was degraded relative to a pure variational technique. However, in comparisons with drifting buoys, the new scheme outperformed both offline and pure variational methods. K E Y W O R D S bias correction, SST, variational methods 1 This article is published with the permission of the Controller of HMSO and the Queen's Printer for Scotland.