In a refrigeration cycle, a small portion of the compressor oil circulates with the refrigerant flow through the cycle components, while most of the oil stays in the compressor. The presence of the lubricant affects the performance of heat exchangers by increasing the pressure losses and adding a thermal resistance to the heat transfer exchange process. The oil effects on microchannel heat exchangers are unique due to their relatively small scale geometry and manifold configuration. In this paper, oil retention in a microchannel type condenser was measured and its effects on heat transfer and pressure drop characteristics are presented. The heat exchanger was a 2 passes, aluminum louvered-fin type condenser that consisted of multiports rectangular microchannels with hydraulic diameter of 0.06 inch (1.7 mm). The refrigerant and oil flow rates were varied and actual operating conditions of an air conditioning condenser for R410A systems were replicated in laboratory. The refrigerant R410A and Polyolester oil mixture was studied at saturation temperature from 85 to 130 °F (29 to 54 °C) and two refrigerant mass flux that are common for a 4 ton nominal capacity AC system for residential applications. Oil mass fraction (OMF) in circulation with the refrigerant was varied from 0.5 to 5.6 in wt.%. The results indicated that at OMFs of 0.5 wt.% to 1 wt.%, which are common ranges in typical air conditioning systems, the oil retention in the microchannel condenser was less than 5% of the microchannel condenser internal volume for all saturation temperatures and all mass fluxes studied in this work. The oil retained in the condenser increased if the OMF increases and it was measured up to 23% of the total microchannel condenser internal volume when the OMF was 5.4 wt. %. The superheated vapor refrigerant section of the condenser held small amount of oil due to high refrigerant vapor superficial velocities inside the microchannel tubes. At OMFs of 0.5 wt. % the heat transfer capacity of the coil was the same of that of oil free conditions. At high saturation temperature of 130 °F (54 °C). and high mass flux, the heat transfer capacity of the coil decreased as the OMF increased and some penalization of refrigerant-side heat transfer rate was observed at OMFs as low as 1 wt. %. If OMF increased then the heat transfer capacity of the heat exchanger was penalized by up to 9% and the pressure drops across the condenser was augmented up to 19% with respect to the oil free case