Thawing of permafrost in a warming climate is governed by a complex interplay of different processes of which only conductive heat transfer is taken into account in most model studies. However, observations in many permafrost landscapes demonstrate that lateral and vertical movement of water can have a pronounced influence on the thaw trajectories, creating distinct landforms, such as thermokarst ponds and lakes, even in areas where permafrost is otherwise thermally stable. Novel process parameterizations are required to include such phenomena in future projections of permafrost thaw and subsequent climatic-triggered feedbacks. In this study, we present a new land-surface scheme designed for permafrost applications, CryoGrid 3, which constitutes a flexible platform to explore new parameterizations for a range of permafrost processes. We document the model physics and employed parameterizations for the basis module CryoGrid 3, and compare model results with in situ observations of surface energy balance, surface temperatures, and ground thermal regime from the Samoylov permafrost observatory in NE Siberia. The comparison suggests that CryoGrid 3 can not only model the evolution of the ground thermal regime in the last decade, but also consistently reproduce the chain of energy transfer processes from the atmosphere to the ground. In addition, we demonstrate a simple 1-D parameterization for thaw processes in permafrost areas rich in ground ice, which can phenomenologically reproduce both formation of thermokarst ponds and subsidence of the ground following thawing of ice-rich subsurface layers. Long-term simulation from 1901 to 2100 driven by reanalysis data and climate model output demonstrate that the hydrological regime can both accelerate and delay permafrost thawing. If meltwater from thawed ice-rich layers can drain, the ground subsides, as well as the formation of a talik, are delayed. If the meltwater pools at the surface, a pond is formed that enhances heat transfer in the ground and leads to the formation of a talik. The model results suggest that the trajectories of future permafrost thaw are strongly influenced by the cryostratigraphy, as determined by the late Quaternary history of a site.