This paper examines the baroclinic instability of a quasi-geostrophic flow with vertical shear in a continuously stratified fluid. The flow and density stratification are both localized in a thin upper layer. (i) Disturbances whose wavelength is much smaller than the deformation radius (based on the depth of the upper layer) are demonstrated to satisfy an ‘equivalent two-layer model’ with properly chosen parameters. (ii) For disturbances whose wavelength is of the order of, or greater than the deformation radius, we derive a sufficient stability criterion. The above analysis is applied to the subtropical and subarctic frontal currents in the Northern Pacific.