The OSS 1 and Spacelab 2 missions found intense broadband waves in the near vicinity of the space shuttle. This paper contains a detailed observational characterization and theoretical investigation of the plasma waves observed within about 10 m of the space shuttle during the XPOP roll period of the Spacelab 2 mission. High wave levels are found from 31 Hz to 10 kHz (near the lower hybrid frequency). Above 10 kHz the wave levels decrease with frequency, reaching the background level near 56 kHz. The frequency distribution of wave electric fields is best interpreted in terms of three components below about 10 kHz and a high‐frequency tail. The primary component is a fairly uniform, high level of waves covering the frequency range from 31 Hz to 10 kHz. The two superposed components in this frequency range have electric fields of order twice the uniform level. The second component corresponds to a low‐frequency peak in the range 100–178 Hz. The third component is found near, and follows the trend of, the lower hybrid frequency. No evidence is found for a high‐frequency component localized above about 10 kHz. The waves show a pronounced amplitude and frequency variation with the quantity V∥/VT which measures the angle between the ionospheric magnetic field and the shuttle's velocity vector. Very low wave levels and small frequency extents are observed when V∥/VT ∼ 1 and the shuttle is moving primarily along the magnetic field. This implies that the waves are probably driven by water pickup ions. Observations of the waves below about 20 kHz during the free‐flight mission imply that the near‐zone waves have wave vectors oriented perpendicular to the magnetic field. The nulls observed in the wave data as the PDP spacecraft moves through the orbiter's wake imply that wavenumber increases with wave frequency. Hwang et al.'s theory for the near‐zone waves is shown to be inconsistent with the frequency distribution and wave vector orientations of the observed waves. A new theory involving Doppler‐shifted lower hybrid waves driven by beamlike distributions of water ions near the space shuttle is developed using linear theory. This linear theory can explain generation of waves with (1) frequencies ranging from near zero frequency to the lower hybrid frequency, (2) wave vectors essentially perpendicular to the magnetic field, (3) wavenumbers increasing with wave frequency, and (4) wavelengths observable by the PDP antenna. These characteristics are all consistent with the observed properties of the waves, thereby providing strong support for the theory. In addition, the theory permits two qualitative explanations for the V∥/VT effect. However, the linear theory cannot explain the details of the observed frequency spectrum of the waves. Strong, qualitative arguments that the effects of spatial inhomogeneity and nonlinear effects should modify the predicted linear spectrum are presented. In particular, the observed ratio of wave energy to thermal plasma energy is of order 10−5, sufficient for nonlinear and strong turbulence effects to be potentially important. Lastly, the observed V∥/VT effect implies optimum conditions for use of the space shuttle as a base for observing plasma waves generated by active experiments or natural ionospheric waves. Ideally, the shuttle's orbit should be designed so that V∥/VT exceeds about 0.7, thereby favoring polar orbits and arguing against equatorial orbits. Alternatively, free‐flying experiments should be used.