A two-photon coincidence experiment of the kind recently proposed by J. D. Franson [phys. Rev. Lett. 62, 2205 (1989)] has been carried out with signal and idler photons produced in the process of parametric down-conversion. The coincidence rate registered by the two detectors is found to exhibit a cosine variation with the optical path difference, with periodicity equal to the wavelength. A number of fourth-order optical interference experiments have been carried out in recent years. [1-8] Unlike conventional second-order interference experiments, these depend on the detection of photon pairs and the interference of two two-photon probability amplitudes.[9] It The two-photon probability amplitude for the shorter is an interesting feature of those experiments that quantum mechanics allows the visibility of the interference to be larger for a two-photon state than is allowed by classical electromagnetic theory. A new and particularly simple form of fourth-order interference experiment with two photons has recently been proposed by Franson [10] as a test for locality violations. The outline of the experiment is shown in Fig. 1. Figure 1: Outline of the experiment proposed by Franson. Two photons emitted together by some common source travel along arms A and B to two detectors DA and DB, either directly along the shortest path or via a longer path involving reflections from two beam splitters and two mirrors, as shown. Franson supposed that the two photons might be produced by the cascade decay of an atom in which the initial excited state is very long lived. But we may also suppose that the two photons could arise from the down-conversion of a highly monochromatic laser beam, of long coherence time, in a nonlinear crystal.[11] In both cases the two photons are highly correlated in time and their state is an entangled quantum state. Let us suppose that the difference in propagation time between the longer and the shorter paths is the same in both channels and is much greater than the coherence time (reciprocal bandwidth 1/∆ω) of the light, or the length of each photon wave packet. Then one might naively suppose that there would be no interference. Indeed the mean detection rate registered by DA or DB would not show any dependence on path difference. However, we arrive at a different conclusion if we look for simultaneous detections by both DA and DB. The two-photon probability amplitude for the shorter paths, A to DA and B to DB, then interferes with the two-photon probability amplitude for the longer paths involving the two mirrors. After forming the sum of the two probability amplitudes and squaring we find that the coincidence rate exhibits a cosine variation with a path difference. This is so despite the fact that the two detectors are widely separated and the trajectories of the two photons never mix. We wish to report the results of an experiment in which this nonlocal interference effect, which has no direct classical counterpart, has been observed. The experiment is shown in Fig. 2. The source of the two photons is the process of spontaneous parametric down-conversion[11] in a crystal of LiIO3 that is optically pumped by the 351.1-nm line of an argon-ion laser. The signal (s) and idler (i) photons produced have wavelengths close to 700 nm but substantial bandwidth, which is restricted by interference filters to about 1012Hz. The main difference between the optical arrangement in our experiment and that proposed by Franson is that the variable delay is introduced via an unbalanced Michelson-type interferometer, rather than with the MachZehnder interferometer arrangement shown in Fig. 1. This requires only one beam splitter in each arm instead of two. One of the mirrors M1, of the Michelson interferometer is mounted on a motor-driven micrometer and can also be moved piezoelectrically, and this allows the optical path difference 2(BS−M1)k−2(BS−M2)k ≡ cTk (where k = s, i) to be nearly equalized in the two arms, and for Ti to be varied in submicron steps in a controlled manner about the fixed value cTi ≈ cTs ≈ 3 cm. The time difference Ts, Ti ∼ 10−10sec therefore greatly exceeds the coherence time 1/∆ω ∼ 10−12sec of the light. In order to make Ts and Ti equal to within 10−12sec in the signal and idler