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Heat transfer and fluid flow in microchannels have been topics of intense research in the past decade. A critical review of the current state of research is presented with a focus on the future research needs. After providing a brief introduction, the paper addresses six topics related to transport phenomena in microchannels: single-phase gas flow, enhancement in single-phase liquid flow and flow boiling, flow boiling instability, condensation, electronics cooling, and microscale heat exchangers. After reviewing the current status, future research directions are suggested. Concerning gas phase convective heat transfer in microchannels, the antagonist role played by the slip velocity and the temperature jump that appear at the wall are now clearly understood and quantified. It has also been demonstrated that the shear work due to the slipping fluid increases the effect of viscous heating on heat transfer. On the other hand, very few experiments support the theoretical models and a significant effort should be made in this direction, especially for measurement of temperature fields within the gas in microchannels, implementing promising recent techniques such as molecular tagging thermometry (MTT). The single-phase liquid flow in microchannels has been established to behave similar to the macroscale flows. The current need is in the area of further enhancing the performance. Progress on implementation of flow boiling in microchannels is facing challenges due to its lower heat transfer coefficients and critical heat flux (CHF) limits. An immediate need for breakthrough research related to these two areas is identified. Discussion about passive and active methods to suppress flow boiling instabilities is presented. Future research focus on instability research is suggested on developing active closed loop feedback control methods, extending current models to better predict and enable superior control of flow instabilities. Innovative high-speed visualization and measurement techniques have led to microchannel condensation now being studied as a unique process with its own governing influences. Further work is required to develop widely applicable flow regime maps that can address many fluid types and geometries. With this, condensation heat transfer models can progress from primarily annular flow based models with some adjustments using dimensionless parameters to those that can directly account for transport in intermittent and other flows, and the varying influences of tube shape, surface tension and fluid property differences over much larger ranges than currently possible. Electronics cooling continues to be the main driver for improving thermal transport processes in microchannels, while efforts are warranted to develop high performance heat exchangers with microscale passages. Specific areas related to enhancement, novel configurations, nanostructures and practical implementation are expected to be the research focus in the coming years. [ABSTRACT FROM AUTHOR]