Microfluidic devices are quite important for process industries, as these devices can intensify heat and mass transfer in two-phase reaction systems. Two-phase reaction systems, such as gas-liquid and liquid-liquid reactions with certain limitations have already been carried out in microfluidic systems by a few authors. However, these concepts are still under development and a detailed understanding of the hydrodynamics involve is required. Hydrodynamics studies are inherently crucial to provide precise reaction conditions and identify asymptotic performance limits. In the present work, Computational Fluid Dynamics (CFD) simulation was carried out to investigate the hydrodynamics involved in the T-junction enhanced microchannel. The slug formation, slug size, slug shape, and pressure drop in the enhanced microchannel were predicted using the volume of fluid (VOF) for water-cyclohexane system. The effects of obstruction spacing on pressure drop, slug lengths, and mixing within the slug were also examined. This study revealed that mixing enhances tremendously within the slug and at the interface in the enhanced microchannel, but with slightly greater pressure drop. However, an increase in obstruction spacing affects the slug formation, unit slug length, and pressure drop.