Posterior shoulder instability (PSI), historically considered rare, accounts for approximately 10% of all shoulder instability cases. Its complex diagnosis and treatment arise from the variability in symptoms, including nonspecific pain and instability, and the distinctions between unidirectional and multidirectional instability, subluxation, or luxation. PSI can result from traumatic, atraumatic, or microtraumatic etiologies, with repetitive microtrauma being the most frequent cause, particularly among athletes engaged in activities that stress the posterior shoulder structures. Diagnosis integrates clinical evaluation, specialized tests (e.g., Jerk, Kim), and imaging, including MR arthrography and CT scans for structural assessment. Nonoperative treatment, involving rehabilitation and neuromuscular retraining, achieves success in atraumatic cases but often fails in traumatic PSI, necessitating surgical intervention. Arthroscopic posterior capsulolabral repair remains the preferred treatment for soft tissue injuries, offering superior outcomes compared to open surgery. For patients with significant bony defects, techniques like posterior bone block or subscapularis transfer are indicated. Advances in arthroscopic techniques have improved functional outcomes, patient satisfaction, and return-to-sport rates. The ABC classification system offers a systematic approach to PSI, categorizing cases based on etiology and pathomechanics to guide treatment. Despite recent advancements, PSI remains a diagnostic and therapeutic challenge requiring individualized management strategies.