Abstract Fine structure in midlatitude sporadic E layer patches or “clouds” is apparent in incoherent scatter observations from the Arecibo Radio Telescope. The fine structure is wavelike with predominant horizontal wavelengths as large as about 2–3 km. We attribute the structure to a drift wave instability operating in the collisional regime. A linear, local dispersion relation for the waves is described which predicts growth driven by polarization electric fields in the cloud. A numerical simulation produces wave growth and other features consistent with the dispersion relation, including finite parallel wavenumbers. The kilometric irregularities are thought to be the primary waves from which secondary, meter-scale waves in the layers can form.