We report progress in the long-term effort to represent the interaction of the solar wind with the Earth's magnetosphere using a three-dimensional electromagnetic particle code. A new run that includes an interplanetary magnetic field yields results that are encouragingly consistent with established features of the solar wind-magnetosphere interaction. After a quasi-steady state is established with an unmagnetized solar wind we switch on a southward interplanetary magnetic field (IMF), which causes the magnetosphere to stretch and allows particles to enter the cusps and nightside magnetosphere. Analysis of magnetic fields near the Earth confirms a signature of magnetic reconnection at the dayside magnetopause, and the plasma sheet in the near-Earth magnetotail clearly thins. Later magnetic reconnection also takes place in the near-Earth magnetotail. Arrival of southward IMF near the front of the magnetosphere causes a sunward velocity in the dayside magnetosphere, as required to feed flux tubes into the dayside reconnection process. Sunward flow near the equatorial plane of the magnetosphere implies a dawn-to-dusk electric field. Initially, the velocity in the distant tail is not much affected by the southward turning. Therefore the dawn-dusk electric field increases in the sunward direction, which causes Bz to decrease with time in the near-Earth magnetotail. The cross-field current also thins and intensifies, which excites a kinetic (drift kink) instability along the dawn-dusk direction. As a result of this instability the electron compressibility effect appears to be reduced and to allow the collisionless tearing to grow rapidly with the reduced Bz component. At the same time the nightside magnetic fields are dipolarized and a plasmoid is formed tailward. We find that due to the reconnection particles were injected toward the Earth from the neutral line (X line). Consistent with this dawn-dusk electric field and magnetic reconnection at the dayside magnetopause, both ions and electrons enter the magnetospheric interior easily. In our simulations, kinetic effects self-consistently determine the dissipation rate in the magnetopause associated with reconnection.¿ 1997 American Geophysical Union