The diabatic effects of latent heat release, boundary layer moisture and heat flux from the ocean surface and large-scale forcing due to upper-level systems are three physical processes affecting oceanic cyclogenesis. Detailed analyses of a major winter storm which occurred during the initial phase of the Air Mass Transformation Experiment in 1975 (AMTEX '75) indicated that the role of these three processes was vital to the Cyclone's development. To gain further insight into their influence, a control and three numerical experiments were performed using a multi-level moist primitive equation model with fine vertical resolution in the boundary layer. The simulation which included complete physics faithfully reproduced the major feature of the observed system. It was found that latent heating had a profound impact on the middle-level baroclinicity, the intensity and phase speed of the storm, and the vertical coupling within the simulated system. Without the surface moisture and heat source, the effects of the model moist processes were greatly reduced, suggesting that the effects of air-sea interaction are important even for short-range (24 h) numerical weather prediction of oceanic cyclones. The exclusion of the large-scale forcing resulted in a rather shallow model system. The dynamic response to diabatic heating became disorganized without the large-scale influence.