Gas in disk galaxies interacts nonlinearly with a underlying stellar spiral potential to form galactic spiral shocks. Numerical simulations typically show that these shocks are unstable to the wiggle instability, forming non-axisymmetric structures with high vorticity. While previous studies suggested that the wiggle instability may arise from the Kelvin-Helmholtz instability or orbit crowding of gas elements near the shock, its physical nature remains uncertain. It was even argued that the wiggle instability is of numerical origin, caused by the inability of a numerical code to resolve a shock that is inclined to numerical grids. In this work, we perform a normal-mode linear stability analysis of galactic spiral shocks as a boundary-value problem. We find that the wiggle instability originates physically from the potential vorticity generation at a distorted shock front. As the gas follows galaxy rotation, it periodically passes through multiple shocks, successively increasing its potential vorticity. This sets up a normal-mode that grows exponentially, with a growth rate comparable to the orbital angular frequency. We show that the results of our linear stability analysis are in good agreement with the those of local hydrodynamic simulations of the wiggle instability.