Necessary and sufficient stability criteria for flute modes localized at the edge of toroidal plasmas are obtained from the Braginskii’s two‐fluid equations without taking into account the collisional effects. It is assumed that the plasma pressure tends to vanish, but its gradient remains finite at the edge of the plasma. The results show that the free‐boundary edge flute modes (namely, the peeling modes) are more dangerous than the fixed‐boundary modes (namely, the Mercier modes). Numerical investigation of the criterion for peeling modes shows that the finite ion‐gyroradius effect can substantially stabilize the modes, especially for the case &Dgr;≥0, where the equilibrium quantity &Dgr;≡1/2+S−1<j⋅B‖∇v‖−2≳, withSdenoting the global shear,Bthe magnetic field,jthe current density,vthe volume inside the reference magnetic surface, and <...≳ denoting the average over the magnetic surface. Equilibria with &Dgr;≥0 are shown to be more stable to the peeling modes than those with &Dgr;≤0.