A preliminary theoretical and computational study of the Kelvin-Helmholtz instability in an inhomogeneous plasma is presented using finite Larmor radius magnetohydrodynamic (FLR MHD) theory. We show that FLR effects (1) can increase or decrease the linear growth rate, (2) cause the nonlinear evolution to be asymmetric, and (3) allow plasma 'blobs' to detach from the boundary layer. The asymmetric growth and nonlinear evolution depend on the sign of B⋅&OHgr; where B is the magnetic field and &OHgr;=∇¿V is the vorticity. The simulation results are qualitatively consistent with the hybrid simulations of Thomas and Winske (1991, 1993) and Thomas (1995). These results suggest that FLR MHD can capture important physical processes on length scales approaching the ion Larmor radius. ¿ American Geophysical Union 1996