Thermal capsular shrinkage was popular for the treatment of shoulder instability, despite a paucity of outcomes data in the literature defining the indications for this procedure or supporting its long-term efficacy. The purpose of this study was to perform a clinical evaluation of radiofrequency thermal capsular shrinkage for the treatment of shoulder instability, with a minimum 2-year follow-up. From 1999 to 2001, 101 consecutive patients with mild to moderate shoulder instability underwent shoulder stabilization surgery with thermal capsular shrinkage using a monopolar radiofrequency device. Follow-up included a subjective outcome questionnaire, discussion of pain, instability, and activity level. Mean follow-up was 3.3 years (range 2.0–4.7 years). The thermal capsular shrinkage procedure failed due to instability and/or pain in 31% of shoulders at a mean time of 39 months. In patients with unidirectional anterior instability and those with concomitant labral repair, the procedure proved effective. Patients with multidirectional instability had moderate success. In contrast, four of five patients with isolated posterior instability failed. Thermal capsular shrinkage has been advocated for the treatment of shoulder instability, particularly mild to moderate capsular laxity. The ease of the procedure makes it attractive. However, our retrospective review revealed an overall failure rate of 31% in 80 patients with 2-year minimum follow-up. This mid- to long-term cohort study adds to the literature lacking support for thermal capsulorrhaphy in general, particularly posterior instability.