In the gaseous envelope of protogalaxies, thermal instability leads to the
formation of a population of cool fragments that are confined by the pressu
re of a residual hot background medium. In order to remain in a quasi-hydro
static equilibrium, the residual gas evolves at approximately the virial te
mperature of the dark matter halo. Its density is determined by the require
ments of thermal equilibrium. The hot gas is heated by compression and shoc
k dissipation. The heating is balanced by direct energy loss due to bremsst
rahlung emission and by conductive losses into the cool clouds, which are e
fficient radiators. The cool fragments are photoionized and heated by the e
xtragalactic UV background and nearby massive stars. Several processes inte
ract to determine the size distribution of the cool fragments. The smallest
are evaporated due to conductive heat transfer from the hot gas. All fragm
ents are subject to disruption due to hydrodynamic instabilities. The fragm
ents also gain mass as a result of collisions and mergers and of condensati
on from the hot gas due to conduction. The size distribution of the fragmen
ts in turn determines the rate and efficiency of star formation during the
early phase of galactic evolution. We have performed one-dimensional hydrod
ynamic simulations of the evolution of the hot and cool gas. The cool cloud
s are assumed to follow a power-law size distribution, and fall into the ga
lactic potential, subject to drag from the hot gas. The relative amounts of
the hot and cool gas are determined by the processes discussed above, and
star formation occurs at a rate sufficient to maintain the cool clouds at 1
0(4) K. We present density distributions for the two phases and also for th
e stars for several cases, parameterized by the circular speeds of the pote
ntials. Under some conditions, primarily low densities of the hot gas, cond
uction is more efficient than radiative processes at cooling the hot gas, l
imiting the X-ray radiation from the halo gas.