The coalescence process of two droplets in simple shear flow was modeled and simulated by the diffuse interface method. The collision between two droplets was investigated. The systems with small Peclet number, which denotes highly diffuse ability of concentration, were found to coalesce faster and easier due to the overlap of interfacial layers. The effect of matrix elasticity on droplet coalescence was studied thoroughly. The matrix elasticity was found to decrease the hydrodynamic interactions between droplets, and delay the coalescence process. (c) 2007 Wiley Periodicals, Inc.