The Faroe Islands, located in the northeastern Atlantic Ocean, utilize a spatial- and effort-based system of fisheries management, explicitly incorporating ecosystem considerations in their policies. This management system was introduced relatively recently (mid-1990s). Given the importance of fishing to the Faroe economy and culture, considerable interest has been expressed in the evaluation of these new management measures at the ecosystem level. We used Ecopath with Ecosim to examine alternative management options for the Faroe Islands fisheries and compared these options with the status quo. Spatially explicit simulations were carried out using the Ecospace routine. Simulations suggest that current area closures could be considered beneficial in conserving major stocks of demersal species, with biomass for cod (Gadus morhua), haddock (Melanogrammus aeglefinus) and other demersal species increasing over the 10-year simulation period. Simulated removal of the closure system reduced the effect of the projected stock increases considerably. Greenland halibut (Reinhardtius hippoglossoides), one of the major deep-water species, and blue whiting (Micromesistius poutassou), one of the main pelagic species, did not benefit from the existing spatial management. Simulated additional offshore closures of at least 20% of habitats deeper than 200m benefited Greenland halibut only. Both, Greenland halibut and blue whiting stocks benefited from drastic reductions in fishing effort (between 20 and 50% reductions from 1997 effort levels). Considerable uncertainty underlies the basic input data, which might have major consequences for the dynamic behaviour of the simulations, and thus might significantly alter the outcomes.