A two-phase annular-seal stand at the Turbomachinery Laboratory of Texas A&M University is utilized to experimentally investigate a labyrinth seal operating under two-phase flow conditions (a mixture of silicone oil and air). A long labyrinth seal (length-to-diameter ratio L/D = 0.75, diameter D = 114.729 mm, and radial clearance Cr = 0.213 mm) is tested at a supply pressure of 62 bars-g with inlet gas volume fraction GVFi ranging from 90 to 100%. Tests were conducted at three pressure ratios PR (0.3, 0.4, 0.5), three rotating speeds (5, 10, 15 krpm), six GVFi (90%, 92%, 94%, 96%, 98%, and 100%), and three inlet-preswirl inserts, namely, zero, medium, and high. Specifically, the ratio between the fluid's circumferential velocity and the shaft surface's velocity are in ranges of 0.0–0.2, 0.5–1.6, and 0.5–2.7 for the zero, medium, and high preswirls respectively. The direct dynamic stiffness KΩ is negative. As GVFi decreases (more liquid), KΩ becomes more negative for the zero preswirl. The effect of changing GVFi on KΩ for the medium and high preswirls is not as clear as for the zero preswirl. For the zero preswirl, as GVFi decreases, the cross-coupled dynamic stiffness kΩ and direct damping C damping increase. However, the effective damping Ceff values converge to almost the same positive value for higher frequencies. Hence, there is no significant effect of change in GVFi for the zero preswirl. For the high preswirl, as GVFi decreases, kΩ decreases and C increases. As GVFi decreases, Ceff becomes less negative and eventually becomes positive for frequencies higher than Ωc. This result indicates that at certain frequencies, the presence of liquid can make the labyrinth seals with high preswirl more stable. For the seal tested, a compressor running at 15 krpm and PR (ratio of seal exit pressure and seal inlet pressure) = 0.5 with the first critical speed of 7500 rpm (125 Hz) would experience an increase in stability with presence of liquid in the flow stream for the medium and high preswirls. However, for the range of GVFi considered here, if swirl brakes are used in a compressor application to reduce the preswirl, there would be no impact of liquid presence on the stability of the compressor. Concerning static measurements, leakage rate increases with decreases in GVFi but remains unchanged with increasing preswirl.