We report on the first observation of Rabi oscillations of continuum transitions in semiconductors, employing two-color transmission spectroscopy with a time resolution of 10 fs. Up to two Rabi cycles are observed in bulk InP for peak intensities exceeding 4 GW/cm(2). Extremely fast phase relaxation due to carrier-carrier scattering results in a strong damping of the oscillations. Surprisingly, the measurements clearly show a decrease of the dephasing rates during the excitation pulse. We attribute this phenomenon to an increase of Pauli blocking and possibly the build-up of screening.