The capillary U-tube is the most fundamental geometrical configuration of a Pulsating Heat Pipe (PHP). In this paper, an improvised numerical model is proposed for the investigation of thermo-hydrodynamics of pulsating two phase flow in a capillary U-tube. The mass, momentum and energy equations are solved using an explicit finite difference scheme. In this model, the vapor is assumed non-isothermal by considering saturation temperature at the liquid vapor interface in calculating the phase change mass and heat transfer instead of the vapor temperature as considered in earlier isothermal models. Pressure loss at bends and capillary effects at meniscus are also considered in the numerical model. A detailed parametric study is conducted to understand the effects of pressure loss at bends, surface tension, PHP orientation, adiabatic length and type of working fluid on the oscillatory two phase flow in a PHP. The inclusion of pressure loss at the bend results in a reduction in the amplitude of oscillation and therefore a reduction in heat transfer rate. It is observed that the inclusion of capillary effects at the liquid meniscus affects the initial distribution of liquid slugs and vapor plugs and it doesn't have any significant effect on steady state PHP operation. The vertical mode of operation is found to show better heat transfer characteristics as compared to horizontal mode of operation. The length of the adiabatic section has a significant effect on the performance of the PHP. Thermal performance reduces considerably with an increase in the adiabatic length. The type of working fluid used in the PHP has also a profound effect on the PHP characteristics. Water and n-pentane show better heat transfer rate as compared to ethanol. The thermal resistance of the U-tube PHP is found to decrease continuously with an increase in the diameter of the capillary tube. © 2012 Elsevier Ltd. All rights reserved.