From 1994 to 1998, a multidisciplinary ecosystem study (the Sound Ecosystem Assessment) examined the primary physical and biological factors that influence the production of pink salmon and Pacific herring in Prince William Sound (PWS), species that experienced population declines after the 1989 Exxon‐Valdez oil spill. Three physical processes are described that influence ecosystem processes: surface layer stratification; upper layer (<100 m) circulation; and exchange between PWS and the northern Gulf of Alaska (NGOA). Stratification formed first in the PWS nearshore regions in March, and subsequently in the northern central basin in April, primarily due to freshening. The northern stratified layer and the associated zonal density front persisted at least through June, but year‐to‐year differences occurred. In spring and summer, circulation in central PWS could be either cyclonic or anticyclonic. Drifter trajectories often linked central PWS to a nearshore bay or fjord, or one bay or fjord to another. September was characterized by a cyclonic circulation and isopycnal doming in central PWS, with little year‐to‐year variability. At Hinchinbrook Entrance, a main connection with the Gulf of Alaska, alternating inflows and outflows occurred in spring over all depths. In summer through early autumn (1995), in the absence of predominantly westward winds, the dominant exchange pattern was outflow above about 150 m and inflow below. In summer through early autumn (1996–98), there was also surface (<20 m) inflow at Montague Strait (the other main entrance). Northward transport at Hinchinbrook Entrance was maximum in late autumn through winter, with inflow above ~150 m and outflow below. Westward wind events over the shelf associated with the weather cycle drove inflow events at both Hinchinbrook Entrance and Montague Strait that may result in transport of zooplankton important to the PWS ecosystem.