The Farley-Buneman instability is a collisional two-stream instability observed in the E region ionosphere at altitudes in the range 90--120 km. While linear theory predicts the dominant wavelengths, it cannot fully describe the behavior of this nonlinearly saturated instability, as observed by radar and rocket measurements. This paper explores the nonlinear behavior of this phenomenon and the resulting waves through simulations and theory. Our two-dimensional simulations model wave behavior in the plane perpendicular to the Earth's magnetic field, applying a fluid model to describe the electron dynamics and either a particle or a fluid model to describe ion behavior. The results show the growth, saturation, and nonlinear behavior of the instability for a much longer period of time than was possible with the pure particle codes used in previous studies. These simulations show (1) growth of Farley-Buneman waves, (2) the development of secondary waves which propagate along the extrema and perpendicular to the Farley-Buneman waves, (3) turning of the primary waves away from the electron drift direction, (4) a saturated wave phase velocity below the one predicted by linear theory but above the acoustic speed and (5) nonlinear electron E¿B0 drifting dominates the behavior of the saturated waves. This paper describes both the simulation techniques and fundamental results. Additionally, this paper outlines a theory explaining the dominant nonlinear process seen in this instability. ¿ American Geophysical Union 1996