In vapor compression air conditioning systems a small portion of the compressor oil circulates with the refrigerant through the components. The oil that is carried with the refrigerant flow typically ranges from 0.5 to 1 percent of the flow rate. This oil accumulates in the heat exchangers, increases the pressure losses and creates an additional thermal barrier to the heat exchange processes. In the present paper, oil retention in a microchannel type evaporator was experimentally investigated and its effects on heat transfer rate and two-phase flow pressure drop are presented. The microchannel heat exchanger was a single pass, aluminum louvered-fin type evaporator with vertical multi-port microchannel tubes. Refrigerant R410A and Polyolester oil mixture was studied at saturation temperature ranging from 33 to 48 °F (0.5 to 9 °C) and for mass fluxes that are commonly observed in 3 ton nominal capacity AC units for residential applications. The results showed that at oil mass fractions (OMFs) of 0.5 to 1 weight percent, the oil volume retained in the microchannel evaporator ranged from 1 up to 11% of the microchannel evaporator internal volume. The oil retention was depended on the OMF and, at same OMF and saturation temperature, the oil retention increased if the refrigerant mass flux decreased. This was due to the reduced driving force that carried the oil throughout the microchannel evaporator. At low OMFs the heat transfer rate diminished by up to 3.5% and the pressure drop was up to 16% higher than that of oil free conditions. The experimental results of this paper are helpful to decrease the energy use and increase the estimated useful life of air conditioning systems.