In this paper, we study the stage of planetary formation during which the particulate material is still dispersed as centimeter-to-meter sized primordial aggregates. During this stage, particles are able to settle toward the midplane into a layer of mass density comparable to or much greater than that of the gas. Nonlinear, coupled interactions between the particles and the nebula gas become significant and ultimately determine the vertical profiles of the particle density and the mean velocities of the particles and the nearby gas. This is the environment in which the earliest planetesimals probably form. Our numerical models rely on the Reynolds averaged Navier-Stokes equations for the gas and particles and are fully viscous and turbulent (and, for the particles, compressible). Our turbulence modeling uses a Prandtl local shear parametrization, validated by laboratory experiments. We have developed a new model for particle diffusion involving the profile of the nebula gas turbulence and the particle Schmidt number, which is a function of particle size and density. We model a cool, quiescent nebula at 1 AU (280K) and 10 AU (90K) and a higher temperature stage (1000K) at 1 AU. Our main results include: (a) rapid accretion of planetesimals by gravitationally unstable fragmentation on an orbital time scale (the "Goldreich-Ward instability") is unlikely to occur until objects have already accreted by some other process to the mass of the largest known meteorite samples, if at all; (b) from "seeds" as small as 10 m, growth of 10- to 100-km planetesimals can proceed rapidly by drift-augmented accretion in the particle-rich midplane with orbital decay of about 1% for the growing planetesimals; (c) outward transport of vapor and small entrained chips can account for significant radial compositional and mineralogical mixing in primitive meteorite parent bodies. Other implications may be drawn concerning particle random collisional velocities and the time scales of midplane turbulence. © 1993 by Academic Press, Inc.