Sources of near-surface oceanic variability in the central North Atlantic are identified from a combined analysis of climatology, surface drifter, and Geosat altimeter data as well as eddy-resolving 1/3¿ and 1/6¿ Community Modeling Effort North Atlantic model results. Both observational and numerical methods give a consistent picture of the concentration of mesoscale variability along the mean zonal flow bands. Three areas of high eddy energy can be found in all observational data sets: the North Equatorial Current, the North Atlantic Current, and the Azores Current. With increasing horizontal the numerical models give a more relatistic representation of the variability in the first two regimes, while no improvement is found with respect to the Azores Current Frontal Zone. Examination of the upper ocean hydrographic structure indicates baroclinic instability to be the main mechanism of eddy generation and suggests that the model deficiencies in the Azores Current area are related to deficiencies in the mean hydrographic that instability based on the velocity shear between the mixed and the interior is also important for the generation of the mid-ocean variability, indicating a potential role of the mixed layer representation for the model. The 1/6¿ model successfully simulates the northward decrease of eddy length scales observed in the altimeter data, which follow a linear relationship with the first baroclinic Rossby radius. An analysis of the eddy--mean flow interaction terms and the energy budget indicates a release of mean potential energy by downgradient fluxes of heat in the main frontal zones. At the same time the North Atlantic Current is found to be supported by convergent eddy fluxes of zonal momentum. ¿ American Geophysical Union 1994