The ion two-stream instability develops between upflowing H+ and O+ in the auroral acceleration region, if the two species are accelerated to different velocities in a semistationary electrostatic potential. Parallel propagating modes are unstable only for small relative drifts, while oblique modes remain unstable at larger drifts and, consequently, higher altitudes. The effects of oblique modes on ion heating are investigated, and it is found that O+ heats primarily by trapping in the direction of wave propagation during the early, coherent phase of wave growth in the temporal evolution problem. After undergoing trapping along the magnetic field direction, H+ heats primarily by quasi-linear diffusion when the spectrum broadens nonlinearly. The parallel ion distributions evolve by formation of a high-energy (low-energy) tail on oxygen (hydrogen) along with bulk slowing of hydrogen, which results in more energetic oxygen than hydrogen. Total heating is greatest in the direction of wave propagation, and this effect is greater for hydrogen than for oxygen. ¿ American Geophysical Union 1989