The first three-dimensional, multimoment, mulifluid model will be developed to study plasma transport phenomena in the auroral ionosphere and their relation to global plasma dynamics. The formation of potential structures in the auroral ionosphere, their connection to low-frequency waves and their association with plasma heating and acceleration are important and outstanding issues concerning Ionosphere-Magnetosphere coupling. To investigate these processes we will generalize our existing one-dimensional (1D) multimoment, multifluid transport model ?Granguli et al., 1988! to three-dimensions by adapting an existing 3D transport code ?Guzdar et al., 1992!. The proposed 3D code will preserve the extensive magnetic field-aligned dynamics of our 1D model. The 3D fluid equations permit a class of low-frequency fluid instabilities and the associated cross-field transport to be treated simultaneously. The consequences of these low-frequency instabilities on auroral processes, such as the formation of potential structures, could be significant but remain unexplored as yet. The cross-field transport can substantially moderate the conclusions of 1D or 2D models. Since the transport is self-consistently generated by plasma fluid instabilities, a unified picture that incorporates both the instability and transport processes requires a 3D formulation. We will use the 3D model to investigate (1) self- consistent generation of auroral potential structures and (2) the associated auroral acceleration processes including plasma heating due to kinetic instabilities. The macroscopic effects of relevant kinetic instabilities (such as the electrostatic ion cyclotron instability) will be incorporated into our 3D model via anomalous collision terms, as was done in our 1D model. The theoretical modeling effort will proceed in tandem with the experimental programs of Dr. J.L. Burch, Southwest Research Institute and Dr. T.E. Moore, NASA/MSFC.