Using analytical and numerical simulation techniques, the nonlinear evolution of the E¿B instability with an inhomogeneous electric field has been studied. For the case where the electric field component parallel to the density gradient is inhomogeneous, we find that the inhomogeneous E¿B instability in the nonlinear regime (1) evolves into large-scale anisotropic fingerlike structures (2) can be described by power laws P(kx)∝kx-nx, nx≂2, P(ky) ∝ky-n, ny≂2-3, where P(kx) and P(ky) are the one-dimensional power spectra parallel and perpendicular to the initial density gradient, and (3) can be stabilized by quasi-linear mechanisms in which the initial density gradient is modified by a finite-amplitude wave spectrum. Application is made to naturally occurring plasma density fluctuations in the auroral ionosphere, but the results are applicable to plasma jet and striation formation in articially produced ionospheric plasma clouds.