The origin and formation of the Subpolar Mode Water (SPMW) located over the Reykjanes Ridge in the North‐Atlantic Ocean and the variability of its properties over the period 1966–2004 are investigated through the use of a global eddy‐permitting (1/4°) ocean/sea‐ice model and a Lagrangian analysis tool. The SPMW is fed by subtropical and subpolar waters advected by the branches of the North‐Atlantic Current. The SPMW acquires its properties when its source waters enter the winter mixed layer in the Iceland Basin. The SPMW temperature variability is mainly explained by variations of the relative contributions of the subtropical and subpolar water transports to the total transport. Compared to the 1966–2004 mean, lower (higher) subtropical water relative transport contribution leads to colder (warmer) SPMW in the early 1990s (in the late 1960s and late 1990s). The intensity of the winter convection in the Iceland basin also influences the SPMW temperature through the amount of relatively cold intermediate waters of subtropical origin integrated in the SPMW layer. Strong convection partly explains the cold SPMW of the early 1990s. The large increase in the SPMW temperature in the late 1990s is due to both a decrease in the winter convection and an increase in the relative transport of the subtropical waters.