The ocean’s permanent pycnocline is a layer of elevated stratification that separates the well-ventilated upper ocean from the more slowly-renewed deep ocean. Despite its pivotal role in organizing ocean circulation, the processes governing the formation of the permanent pycnocline remain little understood. Two factors in particular are generally overlooked: the presence of a zonal channel in the Southern Ocean, and the nonlinear interplay between temperature and salinity distributions. Here we assess the mechanism generating the Southern Ocean’s permanent pycnocline through the analysis of a high-resolution, realistic, global sea ice-ocean model. We show that the permanent pycnocline is formed by seasonal sea ice-ocean interactions in two distinct ice-covered regions, fringing the Antarctic continental slope and the winter sea ice edge. In both areas, persistent sea ice melt leads to the formation of strong, salinity-based stratification at the base of the surface mixed layer in winter. The resulting sheets of high stratification subsequently descend into the ocean interior at fronts of the Antarctic Circumpolar Current, and are projected equatorward into the Southern Hemisphere basins along density surfaces. Our findings thus highlight the crucial role of localized sea ice-ocean interactions in configuring the vertical structure of the Southern Ocean.