This paper presents an investigation of the effect of steady and transient freestream wind shear on the wake structure and performance characteristics of a horizontal axis wind turbine rotor. A new 3-D unsteady vortex-panel method potential flow solver based on a free-vortex-wake methodology, AeroSIM, is used for this purpose. The code is validated using the experimental data from the NREL UAE experiments, as well as checked against the theoretical models developed by previous researchers. Three-different in-flow cases, i.e. uniform in-flow, steady vertical wind shear that uses a power law velocity profile (Normal Wind Profile, NWP) and transient Extreme Wind Shear (EWS), cases are investigated. The results show that the existence of the wind shear in the freestream can create substantial asymmetries and non-periodicities in the structure of the wake behind the turbine rotor. In addition, the blades get subjected to asymmetrical surface pressure variations which in turn result in high amplitude fluctuations in power and thrust levels generated by the turbine. Copyright © 2009 by the authors.