In contrast to Arctic sea-ice trends, Antarctic sea-ice extent has been gradually increasing during the last few decades. Antarctic sea-ice formation and melting (followed by precipitation) are the most important processes for Southern Ocean overturning circulation. Even though glacial melt is relatively small in magnitude, it is located spatially very close to convection areas, where it may also have an influence on dense water formation. Here we explore the impacts of ice-shelf melting on Southern Ocean water mass transformation (WMT) by comparing simulations from the Energy Earth System Model (E3SM) with and without Antarctic ice-shelf melt fluxes. There are no significant differences in net Southern Ocean WMT due to the differences in total surface fluxes between the two simulations. We find, however, that ice-shelf melting produces upwelling of Upper Circumpolar Deep Water (UCDW) and this upwelled water is directly converted to lower density values. Freshwater fluxes produced by ice-shelf melting have a further, indirect impact on the Southern Ocean overturning circulation through the action of sea-ice formation and melting, which also cause considerable upwelling. We further find that surface freshening by ice-shelf melting causes stronger density stratification near the Antarctic coast and hence reduced vertical heat transport from the deeper ocean by trapping warmer water at depth, which results in significant Antarctic sea-ice expansion. Although we find no significant changes in Southern Ocean WMT due to total surface fluxes from the addition of ice-shelf melting processes, our results imply that ice-shelf melting has increased the role of sea-ice in Southern Ocean overturning.