Successful arthroscopic treatment of multidirectional shoulder instability requires that the surgeon reduce the volume of the capsule. This goal can be achieved by using the extracapsular plication technique. There are several advantages to using pancapsular plication and an intra-articular knot. Much better potential for capsular healing exists when the outer layer of the capsule, which is composed of fibrous tissue, is tied extra-articularly. With the intra-articular plication technique, the inner layer of the capsule is synovia, which has less healing capacity. The amount of capsule plication that can be achieved with the extra-articular plication technique exceeds what is possible with the intra-articular plication technique. This is very important in patients who have a large degree of instability in the anterior, the posterior, and, particularly, the inferior direction. Thermal capsulorrhaphy enhances other arthroscopic stabilization procedures. Thermal striping helps to reduce capsular redundancy if laxity persists. However, with arthroscopic extracapsular plication, the capsular tissue can be shortened without using thermal energy.