A phrase that non Southern Californians usually east coasters think is only something people say in the movies, when in fact we use it all the time, along with awesome, stoked and rad. Mostly a coastal term, but also used in the inland empire aka the land of the dirt people.
It describes an impressive event whether it be positive or negative.
That crash was fuckin gnarly dude!
I'm so stoked for the party tonight! It's gonna be gnarly dude!
Another word for cool, awesome, rad, sweet, followed by dude.
bob: You can see that chick's thong!
joe: gnarly dude
Contrary to popular belief, gnarly dude, is not a description of a dude at all. It is an expression generally used after witnessing or otherwise perceiving through a third party any event that is impressive, unbelievable, extraordinary, or out of this world. The phrase is much more closely related to other phrases such as "wow", and "amazing", than to "That dude is gnarly".
*A meteor falls from the sky and lands in the Pacific Ocean causing a tsunami that will surely kill all of the surfers on the beach*
Surfer 1: Fuck my life.
Surfer 2: Gnarly dude.
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A guy who's been severely mangled. A man who's been so inexplicably fucked over, fuck up and shit upon that his body is turned up-side-down and inside out - usually with an eye-ball that wanders attached to some sort of fucked up antenna.
Ken: The motherfucker was one gnarly dude.
Audi: No shit.