Posterior instability of the shoulder is relatively uncommon and often presents a diagnostic challenge to the treating physician. Advances in understanding of the static and dynamic stabilizers of the glenohumeral joint have defined more clearly the pathoanatomy and altered mechanics associated with posterior instability, aiding in diagnosis and management. Posterior instability more commonly presents as recurrent posterior subluxation, with acute posterior dislocation being uncommon. This article clearly defines, classifies, and diagnoses posterior instability of the shoulder so that effective nonoperative management can be instituted early in the development of the disorder and outlines the appropriate indications for nonoperative and operative management, providing the greatest potential for treatment success.