We follow numerically the nonlinear evolution of the Parker instability in the presence of phase transitions from a warm to a cold H i interstellar medium in two spatial dimensions . The nonlinear evolution of the system favors modes that allow the magnetic field lines to cross the galactic plane . Cold H i clouds form with typical masses \simeq 10 ^ { 5 } M _ { \odot } , mean densities \simeq 20 cm ^ { -3 } , mean magnetic field strengths \simeq 4.3 \mu G ( rms field strengths \simeq 6.4 \mu G ) , mass-to-flux ratios \simeq 0.1 - 0.3 relative to critical , temperatures \simeq 50 K , ( two-dimensional ) turbulent velocity dispersions \simeq 1.6 km s ^ { -1 } , and separations \simeq 500 pc , in agreement with observations . The maximum density and magnetic field strength are \simeq 10 ^ { 3 } cm ^ { -3 } and \simeq 20 \mu G , respectively . Approximately 60 % of all H i mass is in the warm neutral medium . The cold neutral medium is arranged into sheet-like structures both perpendicular and parallel to the galactic plane , but it is also found almost everywhere in the galactic plane , with the density being highest in valleys of the magnetic field lines . ‘ Cloudlets ’ also form whose physical properties are in quantitative agreement with those observed for such objects by Heiles ( 1967 ) . The nonlinear phase of the evolution takes \lesssim 30 Myr , so that , if the instability is triggered by a nonlinear perturbation such as a spiral density shock wave , interstellar clouds can form within a time suggested by observations .