The three-dimensional Princeton Ocean Model is used to examine the modification of the Gulf Stream and its meanders by cold air outbreaks. Two types of Gulf Stream meanders are found in the model. Meanders on the shoreward side of the Gulf Stream are baroclinically unstable. They are affected little by the atmospheric forcing because their energy source is stored at the permanent thermocline, well below the influence of the surface forcing. Meanders on the seaward side of the stream are both barotropically and baroclinically unstable. The energy feeding these meanders is stored at the surface front separating the Gulf Stream and the Sargasso Seal which is greatly reduced in case of cold air outbreaks. Thus, meanders there reduce strength and also seem to slow their downstream propagation due to the southward Ekman flow. Heat budget calculations suggest two almost separable processes. The oceanic heal released to the atmosphere during these severe cooling episodes comes almost exclusively from the upper water column. Transport of heat by meanders from the Gulf Stream to the shelf, though it is large, does not disrupt the principal balance. It is balanced nicely with the net heat transport in the downstream direction.