The Ocean and Sea Ice Satellite Application Facility (OSISAF) of the European Organisation for the Exploitation of Meteorological Satellites (EUMETSAT) distributes satellite observations operationally. In this paper, we describe the development of a combined optimal interpolation and nudging (COIN) scheme in the Norwegian Meteorological Institute that assimilates OSISAF sea-ice concentration (SIC) into a coupled sea-ice–ocean Regional Ocean Modeling System (ROMS). The scheme modifies the modeled SIC at every time-step, based on the difference between observation and forecast as well as on the ratio of observation error to model error. Snow and sea-ice thickness are diagnostically modified to match the ice concentration field. Hindcast experiments of Arctic sea ice are performed for the whole of 2009. The results are compared with OSISAF and Advanced Microwave Scanning Radiometer for Earth Observing System (AMSR-E) SIC, showing a significant improvement in the analyzed sea-ice edge and summer SIC.