Linear stability of natural convective flow in an annulus between two concentric horizontal cylinders is studied numerically. In the medium-sized annulus with relative inverse gap ratio (ratio of inner diameter to gap width) between 2.1 and 10.0, the basic two-dimensional flow is found to be unstable with respect to three-dimensional disturbances. Critical Rayleigh numbers above which the two-dimensional basic flow is unstable show good agreement with experimental results. The disturbance velocity distribution obtained by the stability analysis suggests that the instability is mainly caused by buoyancy effects.