Ground ice is abundant in the upper permafrost throughout the Arctic and fundamentally affects terrain responses to climate warming. Ice wedges, which form near the surface and are the dominant type of massive ice in the Arctic, are particularly vulnerable to warming. Yet processes controlling ice wedge degradation and stabilization are poorly understood. Here we quantified ice wedge volume and degradation rates, compared ground ice characteristics and thermal regimes across a sequence of five degradation and stabilization stages and evaluated biophysical feedbacks controlling permafrost stability near Prudhoe Bay, Alaska. Mean ice wedge volume in the top 3 m of permafrost was 21%. Imagery from 1949 to 2012 showed thermokarst extent (area of water-filled troughs) was relatively small from 1949 (0.9%) to 1988 (1.5%), abruptly increased by 2004 (6.3%) and increased slightly by 2012 (7.5%). Mean annual surface temperatures varied by 4.9°C among degradation and stabilization stages and by 9.9°C from polygon center to deep lake bottom. Mean thicknesses of the active layer, ice-poor transient layer, ice-rich intermediate layer, thermokarst cave ice, and wedge ice varied substantially among stages. In early stages, thaw settlement caused water to impound in thermokarst troughs, creating positive feedbacks that increased net radiation, soil heat flux, and soil temperatures. Plant growth and organic matter accumulation in the degraded troughs provided negative feedbacks that allowed ground ice to aggrade and heave the surface, thus reducing surface water depth and soil temperatures in later stages. The ground ice dynamics and ecological feedbacks greatly complicate efforts to assess permafrost responses to climate change.