Experiments were performed to elucidate the effects of simultaneous buoyancy-driven sedimentation and coalescence on the drop-size distribution and phase separation of small drops of 1,2-propanediol dispersed in dibutyl sebacate, The phase-separation rate and average drop size were observed to initially increase due to coalescence, and then to decrease due to the larger drops settling out of the dispersion, The experimental results are in good agreement with theoretical predictions based on inhomogeneous population dynamics equations and collision kernals which account for pairwise hydrodynamic interactions and van der Waals attractions.