The North Water Polynya (NOW, Greenlandic Inuit: Pikialasorsuaq), Baffin Bay, is the largest freshwater polynya and one of the most productive regions in the Arctic. This area of thin to absent sea ice is a critical moisture source for local ice sheet sustenance, and coupled with the inflow of nutrient-rich Arctic Water, supports a diverse community of Arctic fauna and indigenous people. However, as anthropogenic warming continues, formation of the ice arches in Nares Strait that block ice flow from the Arctic Ocean are forming less reliably, jeopardizing the formation of the NOW with uncertain consequences for the local cryosphere and biosphere. Looking to the past, previous studies assume that the NOW only developed following regional deglaciation and the opening of Nares Strait. However, the limited paleoceanographic records that exist from in and around the NOW, and scarcity of diagnostic biological records for the NOW’s associated high pelagic productivity, hinder this assumption. In this study, we aim to characterize the NOW environment via the analysis of surface sediment samples that encompass its modern limits. Our toolkit relies on a variety of lipid biomarkers, including algal highly-branched isoprenoids and sterols for sea ice extent and pelagic productivity, and algal alkenones and archaeal GDGTs for ocean temperature, as well as modern instrumental datasets. All highly-branched isoprenoids exhibit strong correlations with each other and show highest concentrations within the NOW, which suggests a sole spring/autumn sea ice diatom source for these biomarkers rather than a combination of sea ice and open water diatoms as seen elsewhere in the Arctic. Sterols are also highly concentrated in the NOW and exhibit an order of magnitude higher concentration here compared to sites south of the NOW, consistent with the order of magnitude higher primary productivity observed within the NOW relative to surrounding waters in spring/summer months. Finally, our temperature calibrations for alkenones and GDGTs reduce the uncertainty present in global temperature calibrations, but also identify some additional variables that may be important in controlling the distribution of these lipids here, such as salinity, nutrients, and dissolved oxygen. In conclusion, our datasets provide new insight into the utility of these lipid biomarker proxies in high-latitude settings and will help provide a refined perspective on the Holocene development of the NOW with their application in downcore reconstructions currently underway.