Two-phase flow near the wellbore in volatile oil reservoirs causes complications in well test analysis. In this study, the flow behavior of volatile oil reservoirs below the bubble-point pressure and the potential of radial composite model for interpretation of two-phase well test in volatile oil reservoirs was investigated. A radial composite model was used for two-phase well test analysis. A new procedure was developed to interpret well test data and estimate the radius of the two-phase region. The changes in fluid composition near the wellbore during drawdown test were found to increase the saturation pressure, which affects the saturation profile during build-up. Well test results showed that the radial composite method is a powerful tool for well test characterization and estimation of reservoir parameters. The proposed procedure was able to estimate the reservoir parameters and radius of the two-phase region with acceptable accuracy.