Functionality-oriented micro-structures, such as micro-dimples and grooves, are widely used in tribology and heat transfer. Jet electrochemical machining (JEM) is effective to fabricate micro-structures on metallic surfaces. However, in traditional JEM, the unrestricted electrolyte flowing can induce stray corrosion on workpiece, and thus, both surface quality and machining localization are reduced. In this paper, a novel electrolyte-confinement technique is proposed for JEM, a high-density liquid (perfluorotripropylamine, FTPA) is used to confine the electrolyte flowing region on workpiece when electrolyte exits nozzle, facilitating reduction in stray corrosion on workpiece and overcut of micro-structures. A multi-physics model including two-phase flow field and electric field is developed to analyze the electrolyte confined by FTPA, and both simulation and observation results show that the area of electrolyte flowing on the workpiece is confined well by FTPA, and the current density distribution becomes concentrated, which enhances the machining localization. Compared to traditional JEM, the etch factor of micro-dimple is improved by 2.5 times and there is no stray corrosion. The material removal rate is increased due to the concentration of current distribution on the workpiece surface. Furthermore, profile evolution of micro-dimples revealed that with feed depth increased, FTPA could flow into the micro-dimple to protect the sidewall from continuous dissolution, thus forming vertical sidewall. Additionally, electrolyte flowing region is still confined during the scanning motion of nozzle, and the etch factor increases from 0.41 to 8.8 compared to traditional JEM. Moreover, increasing inter-electrode gap could reduce electrolyte flowing region on workpiece, further enhancing machining localization.