The modulation of surface waves by larger‐scale flows is central to many forms of remote imaging of the sea surface yet is an incompletely understood process. An excellent example is the modulation of short waves by long ones (e.g., by swell). Observed modulations are of the order of 10 times the long‐wave steepness, decrease with both the long‐wave frequency and windspeed, and have stable phase, with maximum short‐wave amplitudes just forward of the long‐wave crests. Assuming a balance between propagation, growth, and drift‐enhanced dissipation, the short‐wave modulations arise owing to (1) direct straining by the long‐wave orbital motion, (2) straining of the wind drift layer (modulating the dissipation rate), (3) variations of the apparent gravity in the short‐wave frame, and (4) induced variations of the applied wind stress (affecting both the short‐wave growth and the drift‐enhanced dissipation). As modeled here, only the last (stress variation) can reproduce the observed wind speed and frequency dependence. In addition, the drift layer and the short waves are closely matched, suggesting direct coupling. The implied fractional modulation of stress is of the order of 20 times the long‐wave steepness.