Abstract: A shifting mechanism for an outboard drive of a watercraft provides a simple and compact transmission, as well as streamlines a lower unit of the outboard drive to reduce fluidic drag. The shifting mechanism is located on a drive train generally aligned along a vertical axis and above a propulsion shaft of the lower unit. The drive train includes a rotatable input shaft which is driven by a motor. The transmission of the shifting mechanism, which is located above a cavitation plate of the housing of the outboard drive, selectively couples the input shaft and a drive shaft. The drive shaft in turn is coupled to the propulsion shaft. The transmission includes a clutch which is slidably connected to the drive shaft to move along the vertical axis into and out of direct engagement with the input shaft.