Heat and fluid flow in a compressor into which liquid refrigerant is injected for the purpose of reducing discharge gas temperature in a heat pump system has been numerically studied. A mechanistic approach encompassing liquid jet breakup and droplet evaporation has been performed to investigate the effects of liquid injection on the spacial and temporal variation of the gas temperature and pressure inside the compressor cylinder. Various parameters, such as liquid injection mass, time, duration and droplet size, are considered in the present study to elucidate the flow field inside the compressor. As the injection mass is increased, discharge gas temperature is decreased, while the pressure is increased due to the added mass of the injection. For the injected liquid mass corresponding to 15% of the total vapor mass in the cylinder, the discharge gas temperature drops by 22.4 K. It is observed that the droplet size plays a major role in the evaporation rate of the droplets that determines the degree of the discharge temperature drop.