The thermal-hydraulic instability of a two-phase natural circulation loop, which is a complex multivariable system with high nonlinearity, was investigated experimentally based on the Taguchi method. Excellent results were obtained and a broad picture of the trends produced by the various parameters that affect instability is presented. This study concluded that, within the experimental range, the inlet temperature, heating power and the presence of the unheated bypass channel are the three most dominant factors affecting the loop instability. The Taguchi method is found to be very efficient and there is a great deal of saving in the experimental work. The 20 runs of experiment based on the Taguchi method suggests that the stability of the present two-phase natural circulation loop (TPNCL) would be improved under the following conditions: decreased inlet temperature, decreased thermal load, disconnected unheated bypass channel, installing the compressible volume with a higher water level in the downstream two-phase flow region, disconnected upstream compressible volume, increased single-phase flow restrictions, and decreased two-phase flow restrictions. Although the same trends bear the standard method of stabilizing a boiling channel, the restriction factors in the present experimental investigation are found to be ineffective in dampening the thermal-hydraulic instability. (C) 1998 Elsevier Science Inc. All rights reserved.