The impact of mesoscale vertical motion on the thermodynamic, microphysical, and convective transformations of marine cold air outbreaks (MCAOs) is still largely unknown, partly due to scarce high-resolution observations in upstream Arctic regions. Therefore, this study investigates the effects of mesoscale subsidence on the evolution of the atmospheric boundary-layer (ABL), cloud phase, and precipitation for a case study of a shallow MCAO observed in the Fram Strait in March 2022 during the HALO–(AC)3 campaign. Quasi-Lagrangian large-eddy simulations (LES) are conducted with observational initialisation and larger-scale forcing, based on airborne in-situ and remote-sensing measurements. The LES control simulation accurately reproduces the measured thermodynamic ABL structure and the temporal evolution of the observed air mass moving over the Arctic sea ice onto the open ocean. Specifically, the measured ABL height, integrated water vapour, and cloud water paths are well represented by the LES. Sensitivity experiments using the LES with prescribed subsidence reveal that weaker subsidence substantially alters the evolution of cloud phase during the MCAO, featuring a deeper ABL and an earlier onset of cloud glaciation. This study shows that ABL internal decoupling plays a key role in this process. Decoupling occurs sooner under weaker mesoscale subsidence, triggering convective graupel formation that subsequently intensively converts liquid water droplets. This strong link between glaciation and decoupling arguably explains the typical evolution of the cloud liquid water path observed in many MCAOs. These results provide a process-based framework for interpreting the role of large-scale vertical motion in Arctic air mass transformations.