We propose a modeling strategy to simulate drop movement in a two-phase flow inside a 2-D diverging-converging microchannel. These are planar channels that allow 2-D movement of drops. The increasing cross-sectional area of the diverging section decelerates the drop, and the decreasing cross-sectional area of the converging section accelerates it. These drops as they slow down approach each other and start to interact hydrodynamically and form 2-D arrangements inside the microchannel. We propose interacting drop-traffic models, that are phenomenological in nature, to characterize the different interactions of a drop with the neighboring drops, continuous phase and the channel walls. By incorporating these models into a multi-agent simulation, that employs Newton's second law of motion along with the creeping flow approximation, we are able to predict the positions and velocities of all the drops inside the microchannel. The time evolution of the dynamic 2-D patterns formed by the drops inside the microchannel is investigated. We are able to qualitatively understand the features in a microchannel that aid the formation of the 2-D patterns. The simulation strategy helps us to understand the layering phenomena that results in the formation of the 2-D structures near the diverging section and the breaking patterns of drops near the converging section of the microchannel. © 2014 Springer-Verlag Berlin Heidelberg.