PurposeThe purpose of this paper is to analyze the mechanism of nanofluid enhanced heat transfer in microchannels and promote the application of nanofluids in industrial processes such as solar collectors, electronic cooling and automotive batteries.Design/methodology/approachThe two-phase lattice Boltzmann method was used to calculate the flow and heat transfer characteristics of Al2O3 nanofluids in a microchannel at Re = 50. By comparing the simulation results of pure water, nanofluids without calculated nanoparticle-fluid interaction forces and nanofluids with calculated nanoparticle-fluid interaction forces, the effects of physical properties improvement and interaction forces on flow and heat transfer are quantified.FindingsThe findings show that the nanofluid (φ = 3%, R = 10 nm) increases the average Nusselt number by 22.40% at Re = 50. In particular, 16.16% of the improvement relates to nanoparticles optimizing the thermophysical parameters of the base fluid. The remaining 6.24% relates to the disturbance of the thermal boundary layer caused by the interaction between nanoparticles and the base fluid. Moreover, the nanoparticle has a negligible effect on the average Fanning friction factor. Ultimately, we conclude that the nanofluid is an excellent heat transfer working medium based on its performance evaluation criterion, PEC = 1.225.Originality/valueTo the best of the authors' knowledge, this research quantifies for the first time the contribution of nanoparticle-liquid interactions and nanofluids physical properties to enhanced heat transfer, advancing the knowledge of the nanoparticle's behavior in liquid systems.