We analyze radial and azimuthal variations of the phase balance between the molecular and atomic interstellar medium (ISM) in the Milky Way (MW) using archival CO( J=1-0) and HI 21 cm data. In particular, the azimuthal variations-between the spiral arm and interarm regions-are analyzed without any explicit definition of the spiral arm locations. We show that the molecular gas mass fraction, i.e.,, varies predominantly in the radial direction: starting from~100% at the center, remaining 50% toR 6 kpc and decreasing to ∼10%-20% at = R 8.5 kpc when averaged over the whole disk thickness (from ∼100% to ≳60%, then to ∼50% in the midplane). Azimuthal, arm-interarm variations are secondary: only~20% in the globally molecule-dominated inner MW, but becoming larger, ∼40%-50%, in the atom-dominated outskirts. This suggests that in the inner MW the gas remains highly molecular ( > f 50% mol ) as it moves from an interarm region into a spiral arm and back into the next interarm region. Stellar feedback does not dissociate molecules much, and the coagulation and fragmentation of molecular clouds dominate the evolution of the ISM at these radii. The trend differs in the outskirts where the gas phase is globally atomic ( < f 50% mol ). The HI and H 2 phases cycle through spiral arm passage there. These different regimes of ISM evolution are also seen in external galaxies (e.g., the LMC, M33, and M51). We explain the radial gradient of f mol using a simple flow continuity model. The effects of spiral arms on this analysis are illustrated in the Appendix.