The sonolysis of KI solution containing CCl4 as a separate phase results in the formation of I-2, but shows characteristics which are different from those observed when KI solution alone is sonicated. By the addition of CCl4, the rate goes up by two orders of magnitude, the rate becomes independent of KI concentration, the effect of gas atmosphere becomes less pronounced, and the rate becomes time-dependent. Further the average rate passes through a maximum as the dispersed phase hold-up is increased. These results are explained on the basis of a model which treats cavitation bubbles as microreactors which generate fragmented products from their contents and release them into the liquid phase at the end of collapse phase. The composition of the products of the microreactors is calculated assuming attainment of reaction equilibria; The significant increase in the oxidation rate has been found to be due to release of Cl-2, Cl, and HOCl which act as separate source of reactants to yield I-2. As all these quantitatively react in the reactor with KI, the rate becomes independent of KI concentration. The gas atmosphere here is found to continuously change because of formation of CO2 and O-2. This results in the change in the composition of gas bubble with time, resulting in reduced effect of initial gas atmosphere used. The presence of a dispersed phase reduces the number of bubbles because of attenuation and scattering but increases them due to interfacial cavitation, thus yielding a maximum at a specific hold-up.The model takes these factors into account and is able to not only explain the different observed trends but also predict them quantitatively.