When magnetotelluric (MT) data are obtained in the vicinity of the coast, the surrounding seas make it difficult to interpret subsurface structure, especially the deep part of the subsurface. We introduce an iterative method to correct the sea effect, based on the previous topographic correction method that removes the distortion due to topographic changes in seafloor MT data. The method first corrects the sea effect in observed MT impedance, and then inverts corrected response in a model space without the sea. Due to mutual coupling between the sea and the subsurface structure, the correction and inversion steps are iterated until the changes in each result become negligible. The method is tested for 1- and 2-D structures using synthetic MT data produced by 3-D forward modeling including surrounding seas. In all cases, the method closely recovers the true structure assumed to generate synthetic responses after a few iterations.