HH 111 is a Class I protostellar system at a distance of∼ 400 pc, with the central source VLA 1 associated with a rotating disk deeply embedded in a flattened envelope. Here we present the observations of this system at∼ 0 farcs 6 (240 au) resolution in C 18 O (J= 2—1) and a 230 GHz continuum obtained with the Atacama Large Millimeter/Submillimeter Array, and in SO () obtained with the Submillimeter Array. The observations show for the first time how a Keplerian rotating disk can be formed inside a flattened envelope. The flattened envelope is detected in C 18 O, extending out to≳ 2400 au from the VLA 1 source. It has a differential rotation, with the outer part (≳ 2000 au) better described by a rotation that has constant specific angular momentum, and the innermost part (≲ 160 au) by a Keplerian rotation. The rotationally supported disk is therefore relatively compact in this system, which is consistent with the dust continuum observations. Most interestingly, if the flow is in steady state, there is a substantial drop in specific angular momentum in the envelope–disk transition region from 2000 to 160 au, by a factor of∼ 3. Such a decrease is not expected outside a disk formed from simple hydrodynamic core collapse, but can happen naturally if the core is significantly magnetized, because magnetic fields can be trapped in the transition region outside the disk by the ram pressure of the protostellar accretion flow, which can lead to efficient magnetic braking. In addition, SO shock emission is detected around the outer radius of the disk and could trace an accretion shock around the disk.