The steep continental slope off the Lofoten–Vesterålen islands of northern Norway appears to be the source of the most intense mesoscale eddy field in all of the Nordic Seas. Here we use linearized two-layer shallow-water equations to study the stability of the Norwegian Atlantic Current in this region. The study extends previous works that used linearized quasigeostrophic vertical mode equations to examine the effects of bottom topography on baroclinic instability here. We find evidence of baroclinic instability in the stacked shallow-water model but also of barotropic instability that is associated with the upper-layer lateral shear. The calculations give an indication that growth rates of barotropic instability may be comparable to or larger than those of baroclinic instability over the steepest parts of the continental slope.