We present results of an initial study of Kelvin-Helmholtz instability in a stratified shear flow using a three-dimensional, nonlinear, compressible, spectral collocation model. The simulation was performed at an intermediate Reynolds number and significantly extends previous studies of homogeneous and stratified shear flows. Our major findings include a secondary instability oriented along the two dimensional velocity field, with counter-rotating vortices arising due to both buoyancy and shear sources of eddy kinetic energy within the billow structures. The vortices occupy the outer regions of the billows and contribute significant eddy transports of momentum and potential temperature within the billows. The resulting KH evolution differs in important respects from the corresponding two-dimensional or unstratified flows. ¿ American Geophysical Union 1994