A new type of beam discharge, i.e., beam discharge with a distributed virtual cathode (VC) is pro posed and considered by numerical simulation. The discharge is established during counter motion of high current electron beams in a gas filled equipotential cavity and is characterized by a state of hot dense electron plasma of primary electrons. The discharge temporal dynamics is studied. It is shown that the VC lifetime depends linearly from this sum in a wide range of the sum of beam currents, from the boundary current of two beam instability to the critical current of Pierce instability. Generation of nonlinear electrostatic struc tures shaped as phase bubbles in the discharge is detected, and their dynamics is studied. The parameters are determined, at which the multiple coexistence of phase bubbles and their coalescence during collisions is observed.