The structure and dynamics of diffuse gas in the Milky Way and other disk galaxies may be strongly influenced by thermal and magnetorotational instabilities ( TI and MRI ) on scales \sim 1 - 100 
pc .
We initiate a study of these processes , using two-dimensional numerical hydrodynamic and magnetohydrodynamic ( MHD ) simulations with conditions appropriate for the atomic interstellar medium ( ISM ) .
Our simulations incorporate thermal conduction , and adopt local “ shearing-periodic ” equations of motion and boundary conditions to study dynamics of a ( 100 { pc } ) ^ { 2 } radial-vertical section of the disk .
We demonstrate , consistent with previous work , that nonlinear development of “ pure TI ” produces a network of filaments that condense into cold clouds at their intersections , yielding a distinct two-phase warm/cold medium within \sim 20 Myr .
TI-driven turbulent motions of the clouds and warm intercloud medium are present , but saturate at quite subsonic amplitudes for uniform initial P / k = 2000 { K } { cm } ^ { -3 } .
MRI has previously been studied in near-uniform media ; our simulations include both TI+MRI models , which begin from uniform-density conditions , and cloud+MRI models , which begin with a two-phase cloudy medium .
Both the TI+MRI and cloud+MRI models show that MRI develops within a few galactic orbital times , just as for a uniform medium .
The mean separation between clouds can affect which MRI mode dominates the evolution .
Provided intercloud separations do not exceed half the MRI wavelength , we find the MRI growth rates are similar to those for the corresponding uniform medium .
This opens the possibility , if low cloud volume filling factors increase MRI dissipation times compared to those in a uniform medium , that MRI-driven motions in the ISM could reach amplitudes comparable to observed HI turbulent linewidths .