This paper presents a modified dissipative particle dynamics (DPD) method，which employs an interaction potential with short-range repulsion and long-distance attraction. The modified DPD method is capable of simulating liquids with free surfaces，the behavior of bubbly liquids，drop dynamics and other important multiphase fluid flow processes. The modified DPD method was used to investigate the formation of micro-drops，and the large-amplitude oscillations of an initially oblate liquid drop. The numerical results clearly demonstrate that the modified DPD method involving the interaction potential of short-range repulsion and long-distance attraction is capable of capturing the physics of multiphase micro-drop dynamics，and is of significant importance for investigating complex multiphase systems at micro-meso-scales.