High time rsolution (0.75 s) measurements obtained by the Pioneer 11 vector helium magnetometer inside Saturn's magnetosphere show quasi-periodic waves to be present near the Dione L shell between L=6.3 ahd 6.7. Although Dione was far from the spacecraft, the waves were observed when Pioneer was both inbound to, and outbound from, periapsis and are presumably associated indirectly with Dione. The waves hve a characteristic period of 18 s and a typical amplitude of 5 nT. In the region in which the waves were observed, the Pioneer 11 plasma analyzer detected a peak plasma density associated with heavy ions presumably sputtered from Dione's surface and tentatively identified as O++. Subsequent Voyager observations i this inner torus appear to be consistent with O+. The characteristic period of the waves is well beloww the proton gyroperiod. Because the heavy ions are hot (~106 K), the Alfv¿n phase speed and the ion thermal speeds are nearly the same. Ion cyclotron resonance of the waves with the dominant ions appears capable of generating the waves. Theoretical arguments based on the growth rates of the waves suggest that O++ is more likely to be responsible from O+ but that a resonance involving H+ ions with energies of a few keV cannot be excluded. The existence of a pitch angle anisotropy associated with a loss cone is implied. For O++ a pitch angle anisotropy of ≂0.70, corresponding to T1/T11≂1.7, is predicted. Pitch angle scattering of the heavy ions by the waves should cause precipitation with the possible production of an aurora near 67¿ latitude.