The theory of continuous measurement is generalized so as to be applic
able to a two-mode radiation field whose properties are monitored by u
sing a LAMBDA system with initial coherence between two ground states.
The two-mode system is shown to offer the possibility of generating a
number of new quantum states. Quantum statistics of the field followi
ng continuous measurements is calculated. Results for the phase distri
bution, quasiprobability distribution, and the photon-number distribut
ion of the resulting field are also presented.