The de-oiling hydrocyclone belongs to the most effective devices to recover oil from oily wastewater. An improved multiphase computational fluid dynamics (CFD) model is developed for simulating oil-water separation in a de-oiling hydrocyclone. This model approach uses the Reynolds stress model to resolve the turbulent and the modified mixture model with a new viscosity correlation of oil-in-water (O/W) emulsions. This modified model of emulsion viscosity based on the power law equation and experimental data of three types of crude oil is introduced to predict the viscosity of O/W emulsions. A comparison between experimental and predicted values of separation efficiency demonstrates that multiphase simulations with the modified model of viscosity provide a better accuracy than CFD models associated with original rheological models. This improved CFD model can be further applied in developing new designs in the future.