We study a simple model of decoherence of Aharonov-Bohm oscillations in the
transmission across a metallic mesoscopic ring. In one arm of the ring, th
e electron interacts with a single magnetic impurity via an exchange coupli
ng. The impurity can cause a spin-flip scattering leading to reduction of t
he amplitude of Aharonov-Bohm oscillations. Here decoherence occurs in spit
e of the absence of inelastic scattering. Its origin is traced to the inter
action induced entanglement of quantum states. (C) 2001 Elsevier Science Lt
d. All rights reserved.