We study the formation of dark halos in a Lambda CDM universe under the ass
umption that cold dark matter (CDM) particles have a finite cross section f
or elastic collisions. We compare evolution when CDM mean free paths are co
mparable to halo sizes with the collisionless and fluid limits. We show tha
t a few collisions per particle per Hubble time at halo center can substant
ially affect the central density profile. Cross sections an order of magnit
ude larger produce sufficient relaxation for rich clusters to develop core
radii in the range 100-200 h(-1) kpc. The structural evolution of halos is
a competition between collisional relaxation caused by individual particle
interactions and violent relaxation resulting from the infall and merging p
rocesses by which clusters grow. Although our simulations concentrate on sy
stems of cluster size, we can scale our results to address the halo structu
re expected for dwarf galaxies. We find that collision cross sections suffi
ciently large to significantly modify the cores of such galaxies produce cl
uster cores that are too large and/or too round to be consistent with obser
vation. Thus, the simplest model for self-interacting dark matter is unable
to improve fits to published dwarf galaxy rotation curves without violatin
g other observational constraints.