We present the results of fully three-dimensional numerical simulations of ionospheric plasma cloud evolution. We first consider the evolution of the plasma cloud considered by Drake and Huba [1987> in the limit of vanishingly small ion compressibility. The simulations support the results of the analytical theory: finite plasma temperature, combined with fully three-dimensional plasma dynamics, is a stabilizing influence on plasma cloud evolution. This stability is associated with sheared azimuthal ion flows in the vicinity of the cloud surface. We then consider cloud evolution using realistic values of ion compressibility. We find that the cloud rapidly diffuses to a state in which the sheared azimuthal flow is substantially reduced; subsequently, the cloud becomes unstable and structures. ¿1990 American Geophysical Union