This work studied the flow pattern and reaction kinetics for fatty acid methyl ester (FAME) synthesis through transesterification of palm oil with methanol in a microchannel reactor. It was observed in the experiments using a high-speed camera that the flow pattern evolved along the microchannels due to the coalescence of adjacent droplets. This coalescence phenomenon had significant effects on the variation trend of FAME yield along the microchannels. The influences of catalyst concentration, reaction temperature, and reactant molar ratio on the flow pattern were systematically investigated. It was the first successful attempt to determine the kinetics data for the transesterification of palm oil with methanol in the first 120 s, owing to the use of microchannel reactors. A pseudo-homogeneous model was used to describe the reaction kinetics of FAME synthesis in microchannels. This model performed well at the condition that the reaction equilibrium was reached before the occurrence of droplet coalescence.