Abstract: The generation of anomalously energetic ions in hollow cathodes has posed significant challenges in electric propulsion systems due to the sputtering and erosion on both cathodes and thrusters. To date, it is widely believed that energetic ions are generated by waves and instabilities that are inherent in cathode discharge. However, there is no conclusive evidence yet to suggest that these proposed instabilities can account for the energetic ion energies observed in experiments. In this study, a novel mechanism of charge separation instability in the hollow cathode plume has been identified through particle-in-cell (PIC) simulations. This mechanism is capable of producing energetic ions at levels consistent with those measured in experiments.