The nonlinear evolution of thermospheric winds in an ionosphere-magnetosphere coupled model has been studied for the first time for a dynamic unstable auroral-arc environment. We treat the problem using a multilayer, quasi-three-dimensional model which averages in altitude the thermospheric dynamics over each layer. For the upper thermosphere, we find that (1) the thermosphere can respond to the ionospheric Kelvin-Helmholtz (KH) instability on temporal scales on the order of an hour, depending on ambient conditions, and on spatial scales of tens to hundreds of kilometers, (2) strong thermospheric meridional and zonal vortical flows with embedded nonlinear jet-like structures can be generated by the ionospheric/magnetospheric KH instability, and (3) neutral thermospheric winds, vortices, and associated power spectra develop in a distinctly different manner in the presence of magnetospheric coupling effects. Comparison with recent observations is made. ¿ American Geophysical Union 1993