The stability of plane channel flow between compliant walls is investigated for disturbances which have the same symmetry, with respect to the channel centreline, as the Tollmien–Schlichting mode of instability. The interconnected behaviour of flow-induced surface waves and Tollmien–Schlichting waves is examined both by direct numerical solution of the Orr–Sommerfeld equation and by means of an analytic shear layer theory. We show that when the compliant wall properties are selected so as to give a significant stability effect on Tollmien–Schlichting waves, the onset of divergence instability can be severely disrupted. In addition, travelling wave flutter can interact with the Tollmien–Schlichting mode to generate a powerful instability which replaces the flutter instability identified in studies based on a potential mean-flow model. The behaviour found when the mean-flow shear layer is fully accounted for may be traced to singularities in the wave dispersion relation. These singularities can be attributed to solutions which represent Tollmien–Schlichting waves in rigid-walled channels. Such singularities will also be found in the dispersion relation for the case of Blasius flow. Thus, similar behaviour can be anticipated for Blasius flow, including the disruption of the onset of divergence instability. As a consequence, it seems likely that previous investigations for Blasius flow will have yielded very conservative estimates for the optimal stabilization that can be achieved for Tollmien–Schlichting waves for the purposes of laminar-flow control.