In the wake of Russian aggression in Ukraine and Chinese encroachments in East Asia, conflict that occurs in the “gray zone” between peace and war is increasingly common. Characterized by a high level of ambiguity, gray zone campaigns utilize tactics outside of the conventional military realm to impart gradual changes to the status quo while remaining below the thresholds of overt conflict. While existing research has preliminarily explored the rationale for why states operate in the gray zone, much of the current treatment lacks sufficient explanation for the vast variation in intensity and breadth of gray zone campaigns. Therefore, by presenting a novel theory of how states use the variation inherent within the gray zone to signal, this paper seeks to answer that question. Specifically, the paper presents a model of how the continuum of strategies encompassed within the gray zone allows actors to send targeted signals along a continuum of resolve and restraint; higher intensity tactics that approach the bounded limits of the gray zone signal stronger resolve while lower intensity tactics signal stronger restraint. By carefully modulating the ratio of resolve and restraint signaled, gray zone operator states can impose changes to the status quo while still managing escalation risks. Using a contemporary case study of Chinese gray zone aggression in the Senkaku Islands, the paper provides empirical support for the theory, ultimately demonstrating the important role of signaling considerations in gray zone campaigns. These conclusions have important implications for understanding gray zone conflict and how both academics and policymakers alike should interpret the behavior of states that operate in this realm.