The stability of a general toroidal MHD equilibrium with a continuous pressure profile is investigated for the case where the fluid is surrounded by vacuum. It is found that a disturbance which is localized near the free boundary grows exponentially in time unless a certain necessary criterion is satisfied. Because of the weaker boundary condition, this criterion imposes a more stringent restriction on the configuration than does Mercier's criterion near the boundary. For the cylindrically symmetric case the criterion requires a decrease of the rotational transform and yields a critical relation between the shear and the pressure gradient.