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Permafrost coastlines are experiencing significant erosion as polar amplification has enhanced the effects of climate change in the Arctic. Warmer temperatures are increasing thermo‐denudation and more energetic oceans are increasing thermo‐abrasion in unlithified, ice‐bonded permafrost coastlines which comprise at least 40% of the circum‐Arctic coastline. Here we present developments to and calibration of the Arctic Coastal Erosion (ACE) model, which couples oceanographic and atmospheric conditions at storm‐resolving time steps with a finite element multi‐physics terrestrial permafrost model. This ice‐bonded unlithified permafrost model unites 3D thermal and mechanical governing equations by allowing heat conduction with solid‐liquid phase change to drive ice saturation, which governs evolution of mechanical stress‐strain fields. Developments to the ACE terrestrial model, including introduction of novel erosion criteria to remove failed elements, reformulation of the mechanical material model, and wave pressure boundary conditions, enable simulation of both slowly advancing thermo‐denudation with permafrost sloughing from the face and highly episodic thermo‐abrasion with niche formation and rapidly advancing block failure. A 2018 summer field campaign at Drew Point, Alaska with observations of thermo‐denudation and thermo‐abrasion, including niche geometry before block failure, enable calibration of the terrestrial model. Detailed compositional and geomechanical characterization of the ice‐bonded sediments enabled advances in the material model representation and calibrated model parameters. We demonstrate a daily root‐mean square error of 0.12 m for thermo‐denudation over the summer and achieve block failure within 2 hr of the observed. The calibrated ACE model is the first step towards simulation of other ice‐bonded unlithified circum‐Arctic coastlines for various applications.