The volume-averaged shear-induced drop-coalescence efficiency epsilon(v) is measured by in situ videomicroscopy of blends of poly(propylene glycol) and poly(ethylene glycol), emulsified with poly(ethyleneglycol-b-propyleneoxide-b-ethyleneglycol) block copolymer surfactant. Adsorption of copolymer to the immiscible blend interface is indicated by a reduction in the interfacial tension, measured by the drop retraction method. The effects of temperature, copolymer molecular weight, copolymer concentration, and capillary number Ca are explored. At small Ca, epsilon(v) is essentially independent of shear rate and drop size, and depends mainly on the solubility, diffusivity, and surface pressure of the surfactant, indicating that drop trajectories during flow are perturbed by surfactant Marangoni stresses that are controlled by the diffusion-limited sorption of surfactant. At larger Ca, epsilon(v) approaches zero. This arrest of coalescence is associated with the onset of slight deformation of the drops during their collision, and drainage of a film of continuous fluid between them. The effect of the surfactant, though significant, saturates even while the amount of surfactant adsorbed to the interface is quite small. Governing dimensionless parameters, associated material parameters and the behavior of more insoluble surfactants are discussed. (C) 2003 Elsevier Inc. All rights reserved.