The nature of reflection and mode conversion of MHD waves at the high-latitudinal inductive ionosphere is analyzed, based on the current conservation law of wave modes. The term inductive ionosphere refers to the nonzero rotational electric field or nonzero compressional magnetic field in the reflection process of shear Alfv¿n waves on the ionosphere. The finite rotational electric field causes mutual induction between the divergent and rotational current systems at the ionosphere. The one-step Hall effect for the divergent electric field of the shear Alfv¿n wave produces a rotational Hall current and excites the ionospheric surface compressional wave. The Hall effect for the rotational electric field of an ionospheric surface compressional wave produces a divergent Hall current (two-step Hall effect), which feeds back the compressional magnetic energy to the reflected field-aligned current. We find that the renormalization of the ionospheric rotational electric field to the reflection process of the shear Alfv¿n wave causes some peculiarities in the distribution of ionospheric currents and mode-converted wave magnetic fields. Such peculiarities become particularly obvious in the high-conducting ionosphere. For example, in the ionospheric current distributions, a considerable component of the ionospheric divergent current is accounted for by the divergent Hall current. The rotational Hall and Pedersen currents cancel each other out and lead to zero total ionospheric rotational current. The amplitude of the poloidal magnetic field transmitted from the toroidal magnetic field of the incident shear Alfv¿n wave shows a nonlinear dependence on &Sgr;H/&Sgr;P. It also shows a new type of effective ionospheric shielding effect in the &Sgr;P/&Sgr;A parameter space for a fixed &Sgr;H/&Sgr;P condition. We assert that the inductive response of the ionosphere should become an indispensable concept for reflection, mode conversion, transmission, and generation of various phenomena relating to the field-aligned current system. ¿ 2000 American Geophysical Union