We present a numerical simulation of two-phase flow in a three-dimensional cross-junction microchannel by using the lattice Boltzmann method (LBM). At first, we validated our LBM code with the velocity profile in a 3-dimensional rectangular channel. Then, we developed a lattice Boltzmann code based on the free energy model to simulate the immiscible binary fluid flow. The parallelization of the developed code is implemented on a PC cluster using the MPI program. The numerical results of two-phase flow in the microchannel reveal droplet formation process, which compares well with corresponding experimental results. The size of droplet decreases with increase of the flow-rate ratio and the capillary number. The movement of a droplet through the microchannel induces three-dimensional circulating flow inside the droplet. This complex flow is thought to enhance the mixing and reaction of reagents.