The paper explores thermodynamic aspect of modelling two-phase systems by the methods of irreversible thermodynamics in both classical (CIT) and extended (EIT) formulation. The conservation laws for two-phase model-continuum are derived. Then, the entropy production is analysed for two-fluid and homogeneous systems. Different equations of state are taken into consideration, namely that corresponding to the accompanying equilibrium state of physical element and more complex resulting from EIT. Obtained expressions for rate of entropy production per unit volume allow to identify the dissipative mechanisms in the two-phase system and suggest the forms of phenomenological relations to be adopted in the constitutive equations. (C) 2002 Elsevier Science Ltd. All rights reserved.