The interaction of copropagating electromagnetic and matter waves is described with a set of coupled higher-order nonlinear Schrodinger equations. Optical self-focusing modulates an initially planar wave leading to the generation of dipole forces on the atoms. Atomic channeling due to the dipole forces leads, in the nonlinear regime, to filamentation of the atomic beam. Instability growth rates are calculated for atomic beams with both low and high phase space densities. In one transverse dimension an exact solution is found that describes a coupled optical and atomic soliton.