Water is removed from crude oil containing water by using oil separator. This study aims to develop a three-dimensional (3D) Eulerian computational fluid dynamics (CFD) model to predict the separation efficiency of airwater-oil separator. In the incompressible, isothermal and unsteady-state CFD model, air is defined as continuous phase, and water and oil are given as dispersed phase. The momentum equation includes the drag force, lift force and resistance force of porous media. The standard k-ε model is used for turbulence flow. The exit pressures of water and oil play an important role in determining the liquid level of the oil separator. The exit pressures were identified to be 6.3 kPa and 5.1 kPa for water and oil, respectively, to keep a liquid level of 25 cm at a normal operating condition. The time evolution of volume fractions of air, water and oil was investigated. The settling velocities of water and oil along the longitudinal separator distance were analyzed, when the oil separator reached a steady-state. The oil separation efficiency obtained from the CFD model was 99.85%, which agreed well with experimental data. The relatively simple CFD model can be used for the modification of oil separator structure and finding optimal operating conditions.