Abstract This study evaluates the impact of assimilating high-resolution, inner-core reconnaissance observations on tropical cyclone initialization and prediction in the 2013 version of the operational Hurricane Weather Research and Forecasting (HWRF) Model. The 2013 HWRF data assimilation system is a GSI-based hybrid ensemble–variational system that, in this study, uses the Global Data Assimilation System ensemble to estimate flow-dependent background error covariance. Assimilation of inner-core observations improves track forecasts and reduces intensity error after 18–24 h. The positive impact on the intensity forecast is mainly found in weak storms, where inner-core assimilation produces more accurate tropical cyclone structures and reduces positive intensity bias. Despite such positive benefits, there is degradation in short-term intensity forecasts that is attributable to spindown of strong storms, which has also been seen in other studies. There are several reasons for the degradation of intense storms. First, a newly discovered interaction between model biases and the HWRF vortex initialization procedure causes the first-guess wind speed aloft to be too strong in the inner core. The problem worsens for the strongest storms, leading to a poor first-guess fit to observations. Though assimilation of reconnaissance observations results in analyses that better fit the observations, it also causes a negative intensity bias at the surface. In addition, the covariance provided by the NCEP global model is inaccurate for assimilating inner-core observations, and model physics biases result in a mismatch between simulated and observed structure. The model ultimately cannot maintain the analysis structure during the forecast, leading to spindown.