The melt of snow and sea ice during the Arctic summer is a significant source of relatively fresh meltwater. The fate of this freshwater, whether in surface melt ponds or thin layers underneath the ice and in leads, impacts atmosphere–ice–ocean interactions and their subsequent coupled evolution. Here, we combine analyses of datasets from the Multidisciplinary drifting Observatory for the Study of Arctic Climate (MOSAiC) expedition (June–July 2020) for a process study on the formation and fate of sea ice freshwater on ice floes in the Central Arctic. Our freshwater budget analyses suggest that a relatively high fraction (58 %) is derived from surface melt. Additionally, the contribution from stored precipitation (snowmelt) outweighs by 5 times the input from in situ summer precipitation (rain). The magnitude and rate of local meltwater production are remarkably similar to those observed on the prior Surface Heat Budget of the Arctic Ocean (SHEBA) campaign, where the cumulative summer freshwater production totaled around 1 m during both. A relatively small fraction (10 %) of freshwater from melt remains in ponds, which is higher on more deformed second-year ice (SYI) compared to first-year ice (FYI) later in the summer. Most meltwater drains laterally and vertically, with vertical drainage enabling storage of freshwater internally in the ice by freshening brine channels. In the upper ocean, freshwater can accumulate in transient meltwater layers on the order of 0.1 to 1 m thick in leads and under the ice. The presence of such layers substantially impacts the coupled system by reducing bottom melt and allowing false bottom growth; reducing heat, nutrient, and gas exchange; and influencing ecosystem productivity. Regardless, the majority fraction of freshwater from melt is inferred to be ultimately incorporated into the upper ocean (75 %) or stored internally in the ice (14 %). Terms such as the annual sea ice freshwater production and meltwater storage in ponds could be used in future work as diagnostics for global climate and process models. For example, the range of values from the CESM2 climate model roughly encapsulate the observed total freshwater production, while storage in melt ponds is underestimated by about 50 %, suggesting pond drainage terms as a key process for investigation.