The application of medium-phase microemulsion in enhancing oil recovery technology represents a significant area of research, particularly for improving production in low-permeability reservoirs. The oil recovery can be increased to 80%~90%. In order to further improve the recovery rate of low-permeability reservoirs in the late stage of water flooding, a medium-phase microemulsion flooding system was constructed in this paper. The micro-displacement mechanism of the medium-phase microemulsion flooding system was clarified by experimental methods such as phase change and micro-remaining oil distribution. The ability of enhancing oil recovery and the mechanism of increasing oil production were discussed, which provided a basis for establishing a new method of enhancing oil recovery. This study utilizes a mixed surfactant system composed of sodium dodecyl benzene sulfonate and coconut oil fatty acid lipopolyoxyethylene betaine at a mass ratio of 1:3, with n-butanol serving as the cosurfactant. The fish phase diagram was instrumental in determining the critical concentration range for alcohol (1.3%–3.7%) necessary for the formation of middle-phase microemulsions, along with a corresponding surfactant mass concentration of 0.3%–0.7%. Key salinity thresholds for middle-phase formation and disappearance were identified at 1.5% and 6.0%, respectively. Optimal solubilization effects were observed at approximately 4.8% NaCl mass concentration, which effectively reduced interfacial tension to 10–3 mN/m. Under specific kinetic conditions, in-situ formation of middle-phase microemulsions occurs as surfactants interact with crude oil within reservoir pores. In comparison to traditional water flooding, middle-phase microemulsions enhance viscosity and create an oil wall at the forefront of displacement. This mechanism facilitates the aggregation and movement of residual oil, which is crucial for enhancing crude oil recovery. Moreover, middle-phase microemulsions exhibit strong solubilization capabilities, making them particularly effective for mobilizing oil in blind-end and unswept areas. The ultra-low interfacial tension achieved between the microemulsion and crude oil promotes the elongation and fragmentation of pore-trapped oil into smaller droplets, ultimately aiding in their displacement and recovery via micro-pore outlets. This unique interaction underscores the potential of middle-phase microemulsion flooding to optimize oil recovery processes, especially in challenging reservoir environments such as those encountered in the Changqing Oilfield formations.