Recently developed closure-based and stochastic model approaches to subgrid-scale modelling of eddy interactions are reviewed. It is shown how statistical dynamical closure models can be used to self-consistently calculate the eddy damping and stochastic backscatter parameters, required in large eddy simulations (LESs), from higher resolution simulations. A closely related direct stochastic modelling scheme that is more generally applicable to complex models is then described and applied to LESs of quasi-geostrophic turbulence of the atmosphere and oceans. The fundamental differences between atmospheric and oceanic LESs, which are related to the difference in the deformation scales in the two classes of flows, are discussed. It is noted that a stochastic approach may be crucial when baroclinic instability is inadequately resolved. Finally, inhomogeneous closure theory is applied to the complex problem of flow over topography; it is shown that it can be used to understand the successes and limitations of currently used heuristic schemes and to provide a basis for further developments in the future.