On the basis of ab initio calculations of the phonon frequencies of compressed rare-gas crystals in the model of deformable and polarizable atoms, dynamic instability of the fcc lattice of these crystals is studied. In addition to the earlier-considered three-body interaction, which is associated with the overlapping of the electron shells of atoms, the short-range potential includes three-body forces caused by the mutual deformation of the electron shells of neighboring atoms. It is shown that the allowance for the deformation of the dipole-type electron shells of atoms in the pair and three-body approximations leads to softening of the critical vibrations and absolute instability of the fcc lattice at pressures higher than the critical values, p > p _ c . For light crystals of Ne and Ar under compressions of 0.76 ( p _ c = 422 GPa) and 0.71 ( p _ c = 405 GPa), respectively, the softening of the longitudinal mode is observed at the boundary of the Brillouin zone at the point L ; for heavy crystals of Kr and Xe under compressions of 0.686 ( p _ c = 240 GPa) and 0.605 ( p _ c = 88 GPa), the transverse mode T _1 is softened in the direction Σ. The behavior of second-order Fuchs elastic moduli of compressed rare-gas crystals is discussed.