Permafrost is the term used to describe ground (soil or rock) that remains at or below 0 °C throughout the year for at least two consecutive years. In this chapter, we focus on distribution and physical characteristics of Arctic terrestrial permafrost. We discuss the constituents of permafrost (minerals, organic matter, water, ice, and gas) as well as the presence and importance of ice, leading to patterned ground formation. We explain cryo-pedogenetic processes, hydrology, energy, and water balances, snow-vegetation feedbacks, and gas transport in permafrost regions. Finally, we discuss permafrost degradation and its effects on the energy, water, and carbon balances of the Arctic.