While several observations have been made in recent years of instability features in airglow images of atmospheric gravity waves (AGWs), such measurements are still rare. To date, these features are characterized by appearing to be aligned perpendicular to the AGW wave fronts. Multi-instrument observations confirm the theoretical prediction that such features are caused by convective instabilities where the AGW-induced temperature variation causes the total lapse rate to exceed the adiabatic lapse rate. In February 2000, airglow observations were obtained at Buckland Park, Australia, which showed instability features with a different characteristic. These images showed small-scale (less than 10 km horizontal wavelength) features aligned parallel to the larger scale AGW wave fronts. These features were only seen in OH images, not in O2A images, indicating that they originate below 90 km altitude. Simultaneous MF radar wind data reveal the presence of a mean wind shear which, during the period of the small-scale features, was aligned nearly in the direction of AGW propagation. In addition, the larger scale AGW approached a critical level near 90 km altitude. While the wind shear itself is not large enough to cause an instability, an analysis of the data suggests that the small-scale features are the result of a dynamic (wind shear-induced) instability in the 87--90 km altitude region. The instability was due to a combination of the background wind shear and the large shear induced by the passage of the larger scale AGW as it approached the critical level. ¿ 2001 American Geophysical Union