A nonuniform partially ionized magnetized plasma is shown to be unstable against electromagnetic perturbations. The source of free energy for the instability is sheared magnetic-field-aligned ion flow, which is coupled to the electromagnetic waves via charged particle-neutral collisions. Analytical expressions for the growth rate and threshold are obtained. Numerical studies for the ionospheric parameters suggest that electromagnetic waves grow faster than their electrostatic counterparts. Furthermore, linearly excited electromagnetic waves in partially ionized collisional plasmas are shown to cause nonthermal cross-field transport of plasma particles. The results can have relevance to the current filamentation and the plasma diffusion in the ionosphere of the Earth, as well as in low-temperature laboratory plasmas. ¿ 1998 American Geophysical Union