The formation of vortex structures in an electron plasma with a sheared flow is investigated. The electron fluid is drifting in a self-electric field generated by an unshielded electron population. This setting is linearly unstable and an instability of diocotron (slipping-stream) type occurs. The time scale of the dynamics is assumed to be much shorter than the ion plasma and ion gyroperiods. Consequently, the ions do not respond to the wave potential and serve only as a neutralizing background. An equation determining the nonlinear evolution of the electrostatic potential in a plane perpendicular to an external magnetic field is derived within the drift approximation. The governing equation is then analyzed for the case with a localized shear in the electron fluid velocity. Possible final states of the diocotron instability are investigated analytically and solutions in the form of a tripolar vortex, a zonal flow, and a vortex street are found. The nonlinear time evolution of the diocotron instability is investigated by solving the governing equation numerically. In particular, the dynamics of nonlinearly saturated states and the formation of such states are discussed. Numerical solutions show a vortex street structure in a saturated state. The relevance of our investigation for space and laboratory plasmas is discussed.