Abstract Observations in the Strait of Hormuz (26.26°N, 56.08°E) during 1997–98 showed substantial velocity fluctuations, accompanied by episodic changes in the salinity outflow events with amplitude varying between 1 and 2 psu on time scales of several days to a few weeks. These events are characterized by a rapid increase in salinity followed by an abrupt decline. The mechanisms behind these strong pulses of salinity events are investigated with a high-resolution (∼1 km) Hybrid Coordinate Ocean Model (HYCOM) with particular reference to the year 2005. In accordance with the observations, the simulated salinity events are characterized by strong coherence between the enhanced flows in zonal and meridional directions. It is inferred that most of the simulated and observed outflow variability is associated with the continuous formation of strong mesoscale cyclonic eddies, whose origin can be traced upstream to around 26°N, 55.5°E. These cyclonic eddies have a diameter of about 63 km and have a remnant of Persian Gulf water (PGW) in their cores, which is eroded by lateral mixing as the eddies propagate downstream at a translation speed of 4.1 cm s−1. The primary process that acts to generate mesoscale cyclones results from the barotropic instability of the exchange circulation through the Strait of Hormuz induced by fluctuations in the wind stress forcing. The lack of salinity events and cyclogenesis in a model experiment with no wind stress forcing further confirms the essential ingredients required for the development of strong cyclones and the associated outflow variability.