The influence of viscous heating on the stability of Taylor–Couette flow is investigated theoretically. Based on a linear stability analysis it is shown that viscous heating leads to significant destabilization of the Taylor–Couette flow. Specifically, it is shown that in the presence of viscous dissipation the most dangerous disturbances are axisymmetric and that the temporal characteristic of the secondary flow is very sensitive to the thermal boundary conditions. If the temperature difference between the two cylinders is small, the secondary flow is stationary as in the case of isothermal Taylor–Couette flow. However, when the temperature difference between the two cylinders is large, time-dependent secondary states are predicted. These linear stability predictions are in agreement with the experimental observations of White & Muller (2000) in terms of onset conditions as well as the spatiotemporal characteristics of the secondary flow. Nonlinear stability analysis has revealed that over a broad range of operating conditions, the bifurcation to the time-dependent secondary state is subcritical, while stationary states result as a consequence of supercritical bifurcation. Moreover, the supercritically bifurcated stationary state undergoes a secondary bifurcation to a time-dependent flow. Overall, the structure of the time-dependent state predicted by the analysis compares very well with the experimental observations of White & Muller (2000) that correspond to slowly moving vortices parallel to the cylinder axis. The significant destabilization observed in the presence of viscous heating arises as the result of the coupling of the perturbation velocity and the base-state temperature gradient that gives rise to fluctuations in the radial temperature distribution. Due to the thermal sensitivity of the fluid these fluctuations greatly modify the fluid viscosity and reduce the dissipation of disturbances provided by the viscous stress terms in the momentum equation.