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Contemporarily, "gnarley", as used in Hawaii, means: (1) rugged, difficult, burley; or (2)nasty, rank, disgusting. Quite different from the stereotypical-SoCal-surfer usage of the word.
(1) -Dude, that test was so frickin' gnarley!
-I know! I definitely got worked.

(2) -Somebody passed out in their own barf at that party last night.
-Awwww, gnarley!
gnarley by HI*Girl February 5, 2005
Despite bastardization in recent years to the alternate (Read: "Gay") spelling, Narley, gnarley is akin to rad - a late-1980s - early-1990s term, meaning "exceptional", or "cool". Developed on the West Coast, and used primarily by sufers and skateboarders.
"Hey bra, d'dya scope that gnarley tide?"
"Tscha! That was a ripple, man!"
gnarley by Der Capitan January 14, 2004
A word that means 'rad' or 'awesome', commonly used by surfers, skateboarders or snowboarders.
"That was a gnarley stack you had out there today man"

"Those were some gnarley waves you rode today dude"

"That was some gnarley powder"
Gnarley by Gnarley_Sister August 3, 2006
(Note: See other definitions for gnarley.)

Used to describe the level of extreme-ness of a given scenario/subject.

When viewed this way, it should easily clear up the common misconception that more recent usage deviates from the traditional Pacific/West Coast terminology.
"gnarley":
(1): the skate park up the street sucks for rookies, but there's hella opportunity for experienced skaters to to do some really gnarley tricks.

(2): did you see that kid braggin' how he can do a 900° better than tony hawk? dude totally fucked up & tripped and fell off the top of the ramp before he even dropped in. it was fuckin' gnarley dude- the bone actually broke through the skin and stuck out of his arm when it snapped..there was blood everywhere, fuckin' unreal!
gnarley by TWiSTiDLiTTiLFUCK July 31, 2007
1. awesome! 2. (a very recent defintion) bad, nasty, gross, etc.
for definition 2: Yeah, and he threw up all over. It was just gnarley, man.
gnarley by sayWHUTTE September 19, 2006
same as crazy. this term can be used in a good or bad way. Often used by skaters or surfers.
gnarley events: skateboarding competition (good way).
hurricane devestates town (bad way).
Family takes week vacation in cabo san lucas. (good way)
Gang activity ravels neighborhood. (Bad way)
gnarley by y.j. August 18, 2007