The dynamical properties and spectral characteristics of the ionospheric interchange instability in the collisional and inertial regimes are studied numerically and analytically. The study is based on a two-dimensional fluid model that includes the ion inertia and ion-neutral collisions. Using a pseudospectral method, we follow the evolution of rising plasma bubbles, unstable plasma strata, and driven plasma irregularities in both regimes. We find that the collisional and inertial dynamics are qualitatively similar in the linear stage but markedly different in the nonlinear stage. For both regimes, the fastest growing modes select a characteristic horizontal wavelength and dominate the linear dynamics. In the collisional regime, the vertical and horizontal directions are not strongly coupled and the nonlinear effects generate steepened structures which propagate in the vertical direction. In this regime, the density and the energy power spectra are anisotropic and both have the same form. The vertical density power spectrum is a power law with an index of about -2.5, while the horizontal density power spectrum is knee-like with a peak at about the wavelength of the most unstable modes. In the inertial regime, the nonlinear advection of the plasma generates an isotropic rotational flow that resembles the flow of a neutral fluid governed by the two-dimensional Navier-Stokes equations. The density power spectra are isotropic and have a power law dependence with the power index ranging between -2.0 and -1.5. The energy power spectra are also isotropic with a power law dependence with a break due to an injection band that corresponds to the characteristic horizontal wavelength of the most unstable modes. To the left of the injection band the power index is -1.6 and to the right it is -3, which appears to correspond to an inverses cascade and a forward cascade in k space, respectively. ¿ American Geophysical Union 1989