The effect of free-surface drift layers on the maximum height that a steady wave can attain without breaking is explored through experiments and numerical simulations. In the experiments, the waves are generated by towing a two-dimensional fully submerged hydrofoil at constant depth, speed and angle of attack. The drift layer is generated by towing a plastic sheet on the water surface ahead of the hydrofoil. It is found that the presence of this drift layer (free-surface wake) dramatically reduces the maximum non-breaking wave height and that this wave height correlates well with the surface drift velocity. In the simulations, the inviscid two-dimensional fully nonlinear Euler equations are solved numerically. Initially symmetric wave profiles are superimposed on a parallel drift layer whose mean flow characteristics match those in the experiments. It is found that for large enough initial wave amplitudes a bulge forms at the crest on the forward face of the wave and the vorticity fluctuations just under the surface in this region grow dramatically in time. This behaviour is taken as a criterion to indicate impending wave breaking. The maximum non-breaking wave elevations obtained in this way are in good agreement with the experimental findings.