A theory is presented for the fully-developed flow of gas and particles in a vertical pipe. The relation between gas pressure gradient and the flow rates of the two phases is predicted, over the whole range of cocurrent and countercurrent flows, together with velocity profiles for both phases and the radial concentration profile for the particles. The gas and the particles interact through a drag force depending on their relative velocity, and there are mutual interactions between pairs of particles through inelastic collisions. This model is shown to account for marked segregation of gas and particles in the radial direction, and the predicted relation between the pressure gradient and the flow rates of the two phases is surprisingly complex.