Pattern formation under the action of flow is a subject of considerable scientific interest with applications going from microfluidics to granular materials. Here, we present a systematic investigation of shear-induced banding in confined biphasic liquid-liquid systems, i.e., formation of alternating regions of high and low volume fraction of droplets in a continuous phase (shear bands). This phenomenon is investigated in immiscible polymer blends sheared in a sliding parallel plate flow cell. Starting from a spatially uniform distribution of droplets, the formation of bands aligned along the flow direction is observed, eventually leading to an almost complete separation between droplet-rich and continuous phase regions. The initial band size is related to the gap dimension; the merging of bands and consequent spacing reduction has also been observed for long times. Shear banding is only observed when the viscosity of the dispersed phase is lower as compared to the continuous phase and in a limited range of the applied shear rate. Rheological measurements show that band formation is associated with a viscosity decrease with respect to the homogeneous case, thus implying that system microstructure is somehow evolving toward reduced viscous dissipation under flow.