A nonlocal analysis of the gradient drift instability is presented. The new effect included in this theory is the allowance for an inhomogeneous electric field which produces a sheared drift velocity. It is found that the velocity shear can stabilize the short wavelength modes of the instability, and preferentially excite a longer wavelength mode than would be expected based upon local theory. This result may explain the observations of dominant, long wavelength irregularities in the equatorial electrojet [Kudeki et al., 1982; Pfaff et al., 1982> and be relevant to the formation of auroral arc elements.