We report thermally induced instability leading to catastrophic breakup in acoustically levitated vaporizing fuel droplets. Change in surface tension and viscosity with increase in droplet temperature causes wide fluctuations in droplet aspect ratio. If the viscous damping of aspect ratio oscillation is not strong enough, the droplet goes through unbounded stretching. If the droplet exceeds a critical Weber number locally, a bag type and capillary wave induced atomization can occur, which leads to catastrophic breakup. A stability criterion has been established based on the inhomogeneity of Bernoulli (acoustic) pressure and surface tension of the droplet in terms of a local Weber number and Ohnesorge number. This instability is thermally induced in a droplet which does not experience instabilities without heating. (C) 2012 Elsevier Ltd. All rights reserved.