Several studies indicate that North Atlantic Deep Water (NADW) formation might have initiated during the globally warm Eocene (56–34 Ma). However, constraints on Eocene surface ocean conditions in source regions presently conducive to deep water formation are sparse. Here we test whether ocean conditions of the middle Eocene Labrador Sea might have allowed for deep water formation by applying (organic) geochemical and palynological techniques, on sediments from Ocean Drilling Program (ODP) Site 647. We reconstruct a long‐term sea surface temperature (SST) drop from ~30°C to ~27°C between 41.5 to 38.5 Ma, based on TEX₈₆. Superimposed on this trend, we record ~2°C warming in SST associated with the Middle Eocene Climatic Optimum (MECO; ~40 Ma), which is the northernmost MECO record as yet, and another, likely regional, warming phase at ~41.1 Ma, associated with low‐latitude planktic foraminifera and dinoflagellate cyst incursions. Dinoflagellate cyst assemblages together with planktonic foraminiferal stable oxygen isotope ratios overall indicate low surface water salinities and strong stratification. Benthic foraminifer stable carbon and oxygen isotope ratios differ from global deep ocean values by 1–2‰ and 2–4‰, respectively, indicating geographic basin isolation. Our multiproxy reconstructions depict a consistent picture of relatively warm and fresh but also highly variable surface ocean conditions in the middle Eocene Labrador Sea. These conditions were unlikely conducive to deep water formation. This implies either NADW did not yet form during the middle Eocene or it formed in a different source region and subsequently bypassed the southern Labrador Sea.