An improved vorticity-based gridding technique is presented and applied to create optimal non-uniform Cartesian coarse grid for numerical simulation of two-phase flow. The optimal coarse grid distribution (OCGD) is obtained in a manner to capture variations in both permeability and fluid velocity of the fine grid using a single physical quantity called "vorticity". Only single-phase flow simulation on the fine grid is required to extract the vorticity. Based on the fine-scale vorticity information, several coarse grid models are generated for a given fine grid model. Then the vorticity map preservation error is used to predict how well each coarse grid model reproduces the fine-scale simulation results. The coarse grid model which best preserves the fine-scale vorticity, i.e. has the minimum vorticity map preservation error is recognized as an OCGD. The performance of vorticity-based optimal coarse grid is evaluated for two highly heterogeneous 2D formations. It is also shown that two-phase flow parameters such as mobility ratio have only minor impact on the performance of the predicted OCGD.