The performance of a vapor compression system is known to be affected by the ingestion of liquid droplets in the compressor. In these multiphase flows, the liquid and the vapor phase are tightly coupled. Therefore the interphase heat, mass and momentum transfer as well as droplet dynamics including droplet breakup and droplet-wall interactions play a vital role in governing these flows. Only thermodynamic analyses or two-dimensional mean-line calculations are not sufficient to gain an in-depth understanding of the complex multiphase flow field within the compressor. The objective of this research was to extend the current understanding of the operation of a multistage centrifugal compressor under two-phase flow conditions, by performing three-dimensional computational analysis. In this work, two-phase flow of a single constituent (refrigerant R134a) through a two-stage, in-line centrifugal compressor was analyzed using CFD. The CFD model accounted for real gas behavior of the vapor phase. Novel user defined routines were implemented to ensure accurate calculations of interphase heat, mass and momentum transfer terms and to model droplet impact on the compressor surfaces. An erosion model was developed and implemented to locate the erosion "hot spots" and to estimate the amount of material eroded. To understand the effects of increasing liquid carryover, the mass flow rate of the liquid phase was increased from 1% to 5% of the vapor mass flow rate. The influence of droplet size on the compressor performance was assessed by varying the droplet diameter at the inlet from 100 microns to 400 microns. The results of the two-phase flow simulations were compared with the simulation involving only the vapor phase. Liquid carryover altered the flow field within the compressor, and as a result, both impellers were observed to operate at off-design conditions. This effect was more pronounced for the second impeller. The overall effects of liquid carryover were detrimental to the compressor performance. The erosion calculations showed maximum erosion potential on the blade and shroud of the first impeller. The results from this investigation provided new and useful information that can be used to support improved design solutions.Ph. D.