The flow regimes and pressure drop of air-oil two-phase flow in a half-inch diameter pipe over a wide range of test conditions have been investigated. The flow regimes were identified with the aid of a 1000 frames per second high-speed camera. The current flow regime data show significant differences in the transitional boundaries from the flow regime maps of Mandhane et al. (1974), Taitel and Dukler (1974) and Spedding and Nguyen (1980). The pressure drop measurements were compared to the predictions from four existing pressure drop models: Homogeneous, Martinelli (1948), Chisolm (1973) and Olujic (1985). The Chisolm and Martinelli models were found to be the most accurate, with an average error of about 35 percent. A capacitance sensor for instantaneous void fraction measurement was developed. Results indicate the data from the sensor could be used to identify the different flow regimes.