We determine the galaxy two-point correlation function, xi, at [z] = 2.6 by comparing the number of Lyalpha-emitting galaxies in narrow-band CCD fields selected for the presence of damped Lyalpha absorption to their number in randomly selected control fields. The null hypothesis, xi = 0, can be ruled out at high significance levels in standard cosmologies. Comparisons between our determination of [xi], a density-weighted volume average of xi, and model predictions for [xi] at large redshifts show that models in which the clustering pattern is fixed in proper coordinates are highly unlikely, while better agreement is obtained if the clustering pattern is fixed in comoving coordinates. Therefore, clustering of Lyalpha-emitting galaxies around damped Lyalpha systems at large redshifts is strong. However, our two-point correlation function is inconsistent with the weak clustering detected in a sample of faint blue galaxies. This is a powerful argument that the faint blue galaxies are drawn from a parent population different than normal galaxies, the presumed offspring of damped Lyalpha systems. To learn whether or not the Lyalpha-emitting neighbors of the damped systems are drawn from known galaxy populations we construct a model for galaxy evolution. The model consists of independent galaxy populations and is constrained by the counts and redshift distributions of faint galaxies. We find that the galaxy populations dominating the counts cannot explain the incidence of Lyalpha-emitters in the damped and control fields. As a result an additional population of overly luminous Lyalpha-emitting galaxies is required. The slow rise in the number of these objects per unit magnitude predicted for the control fields at B > 24 may explain why their rate of detection does not increase in the deeper narrow-band frames. We derive a conservative lower limit to the gaseous mass (i.e., H I corrected for the standard He abundance) associated with damped Lyalpha absorption sites of 2.4 x 10(11) h-2 M.. The lower limit could be as high as 2.5 x 10(12) h-2 M., after accounting for incompleteness and evolutionary effects. As a result each damped Lyalpha absorption site contains more than enough baryons to generate a group of galaxies.