The influence of small islands on zonal geostrophic currents is examined in a two-layer configuration. An analytic solution for steady quasigeostrophic flow is derived under the assumption of no upstream influence and is validated numerically in a time-dependent quasigeostrophic model. Under these conditions solutions are the sum of two eigenmodes, which are either arrested Rossby waves or evanescent depending on background flow conditions (layer speeds, stratification, and latitude). In contrast to homogeneous flows, arrested Rossby waves in two layers can occur even when the depth mean flow is westward and can be generated both to the east and west of the island. A third blocking mode may play a role in general, altering the meridional structure of the zonal flow upstream and downstream of the island. The influence of the quasigeostrophic modes on submesoscale island wake eddies is considered in a two-layer primitive equation model with no-slip boundary conditions at the island. Wake eddy formation is inhibited in the presence of an arrested Rossby wave, though the overall drag is similar.