We develop a model of gamma-ray flares of the Crab Nebula resulting from the magnetic reconnection events in highly-magnetized relativistic plasma. We first discuss physical parameters of the Crab nebula and review the theory of pulsar winds and termination shocks. We also review the principle points of particle acceleration in explosive reconnection events (Lyutikov et al. 2017a,b). It is required that particles producing flares are accelerated in highly magnetized regions of the nebula. Flares originate from the poleward regions at the base of Crabs polar outflow, where both the magnetization and the magnetic field strength are sufficiently high. The post-termination shock flow develops macroscopic (not related to the plasma properties on the skin-depth scale) kink-type instabilities. The resulting large-scales magnetic stresses drive explosive reconnection events on the light-crossing time of the reconnection region. Flares are produced at the initial stage of the current sheet development, during the X-point collapse. The model has all the ingredients needed for Crab flares: natural formation of highly magnetized regions, explosive dynamics on light travel time, development of high electric fields on macroscopic scales and acceleration of particles to energies well exceeding the average magnetic energy per particle.
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