CTD data collected from the northwestern Bay of Bengal during late July 1984 reveal the existence of a cold core subsurface eddy centered at 17°40'N and 85°19'E. The thermal structure observed across the eddy indicates that it was confined to a level well below the mixed layer, between 50 and 300 db, and that it had a diameter of about 200 km. A temperature drop of 4–5°C as compared with the surroundings was observed at the center of the eddy. A plausible mechanism for the eddy generation is baroclinic instability at the interface of two opposing boundary currents present along the shelf edge of the western boundary of the Bay of Bengal. The southward current in the northern bay results partly from fresh water influx and to a larger extent from the action of wind stress curl while in the southern part the northward current is purely wind-driven. High stratification caused by fresh water influx prevented the eddy from being detected at the surface.