A novel type of spatial modulational instability induced by the dynami
cal interaction of two strongly coupled fundamental and harmonic field
s in a second-order nonlinear optical material is demonstrated experim
entally. This phenomenon is explained theoretically on the basis of a
one-dimensional Floquet theory. At high intensities, the formation of
a 1D solitary wave lattice is superseded by the onset of 2D modulation
al instabilities.