The establishment of a turbulent mixed layer in a two-layer stratified shear flow, and the rate of entrainment into that layer were studied experimentally in a modified annulus. The modification of the conventional annulus was made by replacing the upper rotating screen with inner rotating sidewalls, extending over the upper half of the channel, so that the flow in the upper layer was nearly uniform and almost laminar, while the bottom layer was quiescent. Vertical density profile measurements were conducted using single electrode conductivity probes. The flow was visualized during the various stages of the experiment using the hydrogen bubble technique. After the start of the sidewalls rotation, the upper layer accelerates from rest, and consequently a transition process is taking place during which the initial density interface between the two layers is developed into a turbulent mixed layer. This turbulent layer is bounded by two sharp interfaces, each separating it from an outer non-turbulent zone. The generation of this five-layer structure seemed to be dominated by instabilities activated by the velocity difference between the upper and lower layer. Once a turbulent mixed layer is formed, entrainment of nonturbulent fluid into that layer is taking place causing its thickness to increase continuously. Depending on the overall Richardson number, based on the channel width, the slope of the entrainment law curve was found to have two different values, each indicating the dominance of a different source of turbulent energy production. For relatively low Richardson numbers, the slope is close to -1.8, implying that the velocity shear across each interface contributes significantly to the entrainment. On the other hand, for larger Richardson numbers the slope is about -1.25, in agreement with previous results of shear-free entrainment experiments. The measured velocity profiles indicate that as long as the mixed layer is not too thick, the radial inhomogeneities are small and the flow may be considered as nearly one-dimensional. It seems, therefore, that for the understanding of entrainment processes occurring in realistic stratified flows, the modified annulus is a more reliable tool than the conventional one.