The Evolution of the Optical Spectrum of the X-Ray Transient RXTE J0421+560 (= CI Cam) The B[e] star CI Cam is the optical counterpart of the X-ray transient XTE J0421+560, which erupted on 1998 March 31. We have obtained a long series of high-resolution spectrograms of CI Cam beginning near the end of the optical outburst and continuing through spring 2000. The spectrum is dominated by emission lines produced in a complex circumstellar environment. One of the most interesting regions is a shell expanding at only 32 km/s that emits a myriad of metal lines, especially Fe II lines. This shell was present and spherically symmetric early in the eruption. We argue that the shell would dissipate in less than 10 years and was maintained by a continual low-velocity wind before the eruption. The shell was penetrated and partly disrupted by high-velocity gas emitted during the eruption. We argue that the low velocity shell places strong constraints on the properties of the underlying binary system: The primary star is probably unusually luminous for a B[e] star; and models for the outburst invoking a compact star in a highly elliptical orbit may need highly contrived physical properties to avoid producing a detectable X-ray luminosity before the eruption.