Classical models of magnetic reconnection consist of a small diffusion region bounded by two symmetric slow shocks, across which the plasma is accelerated. Asymmetries often present in space plasmas are sheared plasma flow and dissimilar plasma densities on the two sides of current sheets. In this paper, we investigate magnetic reconnection in the presence of a shear flow and an asymmetric density across the current sheet using two-dimensional magnetohydrodynamic (MHD) simulations. The results demonstrate that magnetic reconnection can occur only for a plasma flow velocity (in the frame of the X line) which is below the Alfv¿n speed in each inflow region. This limits the velocity of the X line to a certain range for a given flow shear and provides an upper limit to the total velocity shear at which reconnection ceases to operate. Depending on the direction of the flow in the adjacent inflow region, the effects from the sheared flow and from the density asymmetry will compete with or enhance each other in respect to the magnitude and location of the currents which bound the outflow regions. The results are applied to the dayside and flank regions of the magnetosphere. For the dayside region where the magnetosheath flow is slow, the magnetic field transition region is thin and the accelerated flow is earthward of the sharp current layer (magnetopause). At the flanks tailward of the X line, shear flow and density asymmetry effects compete making the magnetic field transition layer broad with the high-speed flow contained within the transition region which explains corresponding observations. At the flanks sunward of the X line, shear flow and density asymmetry effects enhance each other and lead to a strong current sheet on the magnetosheath side of the accelerated flow. The total volume affected by magnetic reconnection is much larger than the steady state region. A large bulge region precedes the steady state region. Qualitatively, the bulge and the steady state region have similar signatures and both can explain observations. We provide criteria in order to distinguish between the bulge and the steady state region in observations. ¿ American Geophysical Union 1995