Around Venus the planetary ionosphere is directly exposed to the shocked solar wind. The interaction takes place in a broad region surrounding the dayside ionosphere, called the mantle, where the shocked solar wind plasma and the plasma of planetary origin have equally important roles. In this paper both the experimentally determined characteristics and the microphysics of the mantle are discussed in detail. It is shown that as a result of the interaction between the two plasma populations, a modified two-stream instability develops, and waves are excited with a frequency of a few times the lower hybrid frequency. The polarization of the waves is almost perpendicular to the magnetic field. The stabilization of the higher-frequency part of the wave spectrum is the result of transverse wave convection in the particular sheet-like geometry of the mantle. The interaction of these waves with planetary ions and electrons is described within the framework of a nonlinear model in which the saturation of the modified two-stream instability is due to induced scattering of the waves on cold planetary ions. The effective collision frequency between the shocked solar wind protons and planetary ions is also calculated; it is shown how this leads to ion pick up and heating. Other macroscopically observable effects of these processes are electron acceleration along the magnetic field and ionospheric heating. The experimental data collected in the dayside mantle of Venus by the instruments carried onboard the Pioneer Venus Orbiter are compared to our model. It is believed that the observations support the scenario presented. ¿ American Geophysical Union 1995