System and method for adjusting the values of the prognostic variables near the interface between a nonhydrostatic, high resolution model embedded in a hydrostatic, coarser resolution model. The system and method condition the outer domain lateral boundary values to enforce conservation of volume when the variables are interpolated onto the inner domain grid. The conditioning adjusts the baroclinic normal velocities at the open boundaries before interpolation. The system and method also include a relaxation scheme which matches the values of the prognostic variables across a zone near the open boundaries of the submesoscale inner domain to prevent the development of discontinuities, reflections and perimeter currents at the periphery of the inner domain.