Particle interactions in the Bose-Einstein condensate lead to a nonlinearity, absent in photon optics. This is exploited to generate a non-classical state with reduced atom-number fluctuations inside the interferometer. This state is then used to study the interaction-induced dephasing of the quantum superposition. The resulting coherence times are found to be a factor of three longer than expected for coherent states, highlighting the potential of entanglement as a resource for quantum-enhanced metrology.