Numerical simulations of the instability, merger, and breaking of two piecewise‐constant finite‐area vortex regions (FAVR’s) are presented. An improved contour dynamical algorithm with node insertion‐and‐removal to maintain theaprioriaccuracy is used. Corotating ’’Vstates’’ (symmetric steady‐state FAVR’s) were found to be unstable when properly perturbed if their centroid‐effective radius ratio, x¯/R, is <1.6, thereby verifying an estimate of Saffman and Szeto. This causes the FAVR’s to approach at an exponential rate, merge, and reform into a stable perturbed elliptical structure with filamentary arms (to conserve angular momentum). For larger x¯/Rratios, regular perimeter oscillations were observed and estimates of an eigenfrequency of the perturbed stableVstates were obtained. When regions of different vorticity density merge, the larger‐density region is eventually entrained within the smaller‐density region. These simulations elucidate the self‐consistent close interactions of isolated vortex regions in two‐dimensional high Reynolds number flows.