We study the effects of shear flow on the structure of a lamellar phase in a C16E7 [hepta(oxyethylene glycol)-n-hexadecyl ether]/water system (40-55 wt % Of C16E7) at 70degreesC using small-angle neutron scattering in the range of shear rate of 10(-3)-30 s(-1). At the shear rate 0.1-1 s(-1), the repeat distance (d) is decreased significantly (down to about 40% of d at rest in the most significant case) and discontinuously with increasing shear rate. With the further increase in the shear rate, d increases through a sharp minimum (referred to as d*). Such a shear rate dependence of d is obtained for all the principal orientations of lamellae. As the concentration Of C16E7 decreases from 55 to 40 wt %, d increases from 6.5 to 8.5 nm at rest whereas d* remains almost constant (congruent to5 nm). Moreover, d* is found to be almost equal to the thickness of bilayers obtained from the line shape analysis of small-angle X-ray scattering at rest. The results strongly suggest that the water layer is excluded by shear flow and that the lamellar phase segregates into surfactant-rich and water-rich regions, although these regions do not reach macroscopic size.