Simulations with a two-dimensional electromagnetic particle code in the Darwin approximation are used to investigate mechanisms for the generation of potential differences across magnetic field lines in the magnetotail region earthward of the neutral line. Two mechanisms are found. One is the electrostatic ion cyclotron wave generated by counterstreaming ion beams. Another and more powerful process depends on the generation of magnetic fields, By, normal to the noon-midnight meridian plane of the magnetosphere. Currents carried primarily by electrons generate a By. This causes the magnetic field to loop out of the meridian plane in a direction such that electrons lose potential energy and gain kinetic energy in the convection electric field. Much of the kinetic energy goes into motion in the x direction in the region of the neutral sheet. The current carried by the electrons is in a direction to intensify the By field. The electrons are also compressed, resulting in a negative space charge in the region of the electron current jet. This process therefore generates electrostatic potential variations across magnetic field lines. Contrary to prior expectations, there is no evidence that tearing mode instabilities or conducting boundaries play any prominent role in the generation of the potentials. ¿American Geophysical Union 1987