The capillary tube in a transcritical CO2 system behaves differently as temperature and pressure are two independent parameters unlike those in a sub-critical cycle. A capillary tube-suction line heat exchanger (CL-SLHX) in a transcritical vapour compression cycle considering homogeneous two-phase flow is modelled in this study based on mass, energy and momentum equations. Effects of gas cooler temperature, evaporator temperature and internal diameter of capillary tube are investigated. Heat transfer rate is observed to be influenced by refrigerant quality, mass flow rate and the prevailing temperature difference. Heat transfer rate variation with gas cooler temperature is unique, recording an initial increase followed by a decrease. Frictional pressure drop influences the heat transfer; consequently, chances of re-condensation of refrigerant vapour are very marginal. Larger diameter of capillary tube leads to increase in refrigerant mass flow rate and increase in heat transfer rate as well. Shorter inlet adiabatic capillary length with larger heat exchanger length is better for heat transfer. This study is an attempt to dispel the scepticism prevailing in transcritical CO2 system community overemphasising the need for a throttle valve to control the optimum discharge pressure. (C) 2008 Elsevier Ltd. All rights reserved.