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Abstract We develop a permafrost classification system to describe the complex interaction of climatic and ecological processes in permafrost formation and degradation that differentiates five patterns of formation: ‘climate‐driven’; ‘climate‐driven, ecosystem‐modified’; ‘climate‐driven, ecosystem‐protected’; ‘ecosystem‐driven’; and ‘ecosystem‐protected’ permafrost. Climate‐driven permafrost develops in the continuous permafrost zone, where permafrost forms immediately after the surface is exposed to the atmosphere and even under shallow water. Climate‐driven, ecosystem‐modified permafrost occurs in the continuous permafrost zone when vegetation succession and organic‐matter accumulation lead to development of an ice‐rich layer at the top of the permafrost. During warming climates, permafrost that has formed as climate‐driven can occur in the discontinuous permafrost zone, where it can persist for a long time as ecosystem‐protected. Climate‐driven, ecosystem protected permafrost, and its associated ground ice, cannot re‐establish in the discontinuous zone once degraded, although the near surface can recover as ecosystem‐driven permafrost. Ecosystem‐driven permafrost forms in the discontinuous permafrost zone in poorly drained, low‐lying and north‐facing landscape conditions, and under strong ecosystem influence. Finally, ecosystem‐protected permafrost persists as sporadic patches under warmer climates, but cannot be re‐established after disturbance. These distinctions are important because the various types react differently to climate change and surface disturbances. For example, climate‐driven, ecosystem‐modified permafrost can experience thermokarst even under cold conditions because of its ice‐rich layer formed during ecosystem development, and ecosystem‐driven permafrost is unlikely to recover after disturbance, such as fire, if there is sufficient climate warming. Copyright © 2007 John Wiley & Sons, Ltd.