Interannual modulation of the seasonal signal in the Kuroshio Extension region is studied using TOPEX altimeter and advanced very high resolution radiometer (AVHRR) data. Meridional profiles of the surface eddy kinetic energy indicate a significant drop in eddy energy levels beginning early in 1994 and persisting until the summer of 1995. The low eddy energy levels are most apparent during the summer and fall 1994. The contribution of the convergence of Reynolds stresses to the zonal momentum budget, -(u'v')y, is much weaker in 1994 than in either 1993 or 1995, especially during summer. The low values of Reynolds stresses lead the low eddy kinetic energy values by about a season, consistent with the characteristic timescale of the eddy energy, which is about 90--110 days in this region. AVHRR-derived estimates of sea surface temperature indicate that the subpolar gyre was cooler during summer 1994 relative to the summers of 1993 and 1995. Calculations of the baroclinic zonally symmetric circulation indicate that the Kuroshio Extension was frontolytic during summer 1994, which could account for the observed drop in eddy kinetic energy. In particular, convergence of heat due to eddy flow appears to play a crucial role in the interannual modulation of the seasonal signal of the Kuroshio Extension.