Abstract The use of liquid–liquid slug flow in the capillary microreactor is a promising technique for intensifying heat and mass transfer in liquid–liquid reactions. Although the concept has so far been exploited without much reference to the detailed hydrodynamics involved, these are nevertheless inherently crucial to its potential for providing well-defined reaction conditions and identifying asymptotic performance limits and thus a worthwhile subject for more rigorous analysis. In this work, the effect of various operating conditions on the flow regimes, slug size, interfacial area and pressure drop has been investigated. Experiments were carried out to determine these parameters using different Y-junction mixing elements with various downstream capillaries. The pressure drop was measured across the Y-shaped mixing element and along the length of the downstream capillaries. Since the slug flow is comprised of alternating segments of two immiscible phases, the experimentally measured pressure drop along the length of the downstream capillary was compared with a simplified theoretical prediction based on capillary pressure and hydrodynamic pressure drop of the two individual phases. As the comparison showed considerable discrepancies, the model was modified to include the formation of a thin wall film by one of the phases. The pressure drop model taking the presence of a thin film of the organic phase into account is found to be in good agreement with experimental results. The power required for generating interfacial area was ascertained from the pressure losses over the Y-junction. The results of interfacial area and power requirement calculations indicate that the slug flow capillary microreactor is far superior to conventional equipment in terms of the specific energy, power input per unit interfacial area generated.