A rheo-optical methodology, based on small angle light scattering and transmitted light intensity measurements, has been used to study in situ and on a time resolved basis the shear induced morphology in ternary two-phase water-gelatin-dextran mixtures. Emulsions close to the binodal line as well as far from it have been investigated. It is shown that above a critical shear rate, shear-induced mixing occurs at the length scales probed by the laser light. It is hypothesized that the shear-induced homogenization is due to the shear forces that exceed the intermolecular forces of the self-association process of the gelatin. The isothermal phase diagram at a fixed shear rate has been determined. In addition, the structure evolution after cessation of flow has been studied. When flow is stopped after homogenization, phase separation occurs almost instantaneously. When subsequently applying a low shear rate, the structure coarsens due to coalescence of the dispersed droplets. The kinetics of this coalescence process is strain controlled.