Slurry bed hydrocracking, as a pioneering technology in heavy residue upgrading, is becoming commercial and will be the predominant process among the available upgrading technologies. The general trends in reaction performance and operating pressure imply that reduction of catalyst particle size would lead to the lower operational pressure. It this study, the microemulsion method has been used to reduce the catalyst size of the slurry hydrocracking process by a factor of 10. Bright stock as the oil phase, aqueous solution of ammonium heptamolybdate (hydrocracking catalyst), and two types of surfactant packages (A and B) containing fatty acid, ethanolamine, alcohols, and Span 80 have been used to produce clear emulsions. Dynamic light scattering and transmission electron microscopy experiments indicated that the catalyst size has been reduced to 1-2 and 8-15 nm in laboratory and pilot scales, respectively. The best percentage of hydroconversion using the emulsion catalyst (surfactant/catalyst ratio = 2:1) and heavy oil as feed in the pilot test was about 50% at once through operation. At higher surfactant/catalyst ratios, the conversion decreased in comparison to the case where no emulsion catalyst was used.