An eddy-permitting 2-1/2-layer Reduced Gravity Ocean (RGO) model is developed. Compared with the conventional 2-1/2-layer RGO models, the new model has improvements in subsurface thermodynamics, vertical mixing scheme and open boundary conditions. Using this new 2-1/2-layer RGO model as a dynamical tool, a systematic investigation of the role of oceanic processes in controlling tropical Atlantic sea-surface temperature (SST) response to Atlantic Meridional Overturning Circulation (AMOC) changes is carried out by varying the strength of northward mass transport at the open boundaries. It is found that the North Brazil Undercurrent (NBUC) reverses its direction in response to a shut-down of the AMOC. Such circulation change allows warm waters of the northern subtropical gyre enter the equatorial zone, giving rise to a prominent warming in the Gulf of Guinea and off the coast of Africa. Sensitivity experiments further show that the SST response behaves nonlinearly to AMOC changes. The rate of SST changes increases dramatically when the AMOC strength is below a threshold value. This nonlinear threshold behavior depends on the position of subsurface temperature gradient. The new RGO is coupled to an atmosphere general circulation model (AGCM) (CCM3.6). The coupled model is capable of capturing major features of tropical Atlantic variability. With the aid of this coupled model, a series of experiments with different combinations of oceanic and atmospheric processes are carried out to elucidate the relative importance of the oceanic processes and atmospheric processes in AMOC-induced tropical Atlantic variability/change. It is found that the oceanic processes are a primary factor contributing to the warming at and south of the equator and the precipitation increase over the Gulf of Guinea, while atmospheric processes are responsible for the surface cooling of the tropical north Atlantic and southward displacement of ITCZ. The sensitivity of the coupled system to different strength of the AMOC is further investigated. It is found that equatorial SST and precipitation response also behaves nonlinearly to AMOC changes. The impact of AMOC changes on Tropical Instability Waves (TIWs) is assessed. It is found that the activity of TIWs is reduced in response to the AMOC-induced equatorial SST warming. Correlation analysis suggests that AMOC may affect TIW activities by modifying SST gradient north of the equator.