This article presents a mass correction procedure for unidirectional stratified flow of two fluids (or two phases of the same fluid) using the level-set method. A localized mass correction term is introduced to ensure mass conservation at every axial cross-section. The mass correction term is based on the mass flowrates. Phase change is captured using the mass correction term. For demonstration purposes, this article assumes that both phases are at their respective saturated states and the heat addition results in phase change at the saturation temperature. Results for various combinations of density, viscosity and mass flowrate ratios are presented. The proposed procedure is validated using available fully developed exact solutions for unidirectional stratified flow. The evolutions of the interface in the developing region are also captured and compares well with "exact" solutions. (C) 2004 Elsevier Ltd. All rights reserved.