We study the formation mechanism of two-dimensional solitary waves observed in the auroral region via two-dimensional electrostatic particle simulations. The FAST satellite observed very strong solitary waves in the downward current regions of the mid-altitude auroral zone, and the Polar satellite also succeeded in detecting solitary waves in the polar region. These solitary waves are reported to have isolated two-dimensional structures. The present simulation study demonstrates that such isolated two-dimensional solitary waves can be generated by a simple electron two-stream instability. We performed two simulation runs; one was a run without ion dynamics, and the other was a run with ion dynamics. By comparing these two runs, we found isolated two-dimensional potentials are generated due to the ion dynamics. In these simulations an initial electron beam instability first forms solitary potentials isolated in the parallel direction. When the ion dynamics are neglected, these potentials become coherent in the perpendicular direction, forming one-dimensional structures. Owing to the ion dynamics, however, quasi-perpendicular lower hybrid waves are strongly excited through coupling with parallel drifting electron potentials. Potentials are divided in the perpendicular direction by these lower hybrid waves, forming isolated two-dimensional potentials. In a long time evolution, these isolated two-dimensional potentials are gradually aligned in the perpendicular direction, and the perpendicular potential energy decreases. Finally, they again become one-dimensional potentials coherent in the direction perpendicular to the ambient magnetic field. ¿ 2000 American Geophysical Union