A prediction technique for the lubricating oil temperature in a manual transaxle was developed. Using this technique, the effects of heat transfer enhancement and heat generation decrease, etc., on the oil temperature reduction can be estimated. The heat generation in a manual transaxle is caused by lubricating oil stirring, friction and gear meshing. The heat transfer and flow characteristics are thus very complicated under the two-phase flow of the oil and air induced by rotating gears. It is necessary for the development of the prediction technique to model the heat transfer process in a manual transaxle. The experiments measuring of heat generation, heat flux and the air flow velocity distribution around the manual transaxle were conducted to get information for modeling the heat transfer process. A flow visualization of two-phase flow in the manual transaxle was also conducted. The prediction technique for the lubricating oil temperature was then developed using the heat transfer model based on the experiments. The oil temperature change is immediately predicted within 3 centigrade accuracy by a personal computer with this technique. The conclusions presently reached are: the lubricating oil-volume-reduction is very effective in the lubricating oil temperature reduction, and improvements in the air flow around the manual transaxle are also effective in the lubricating oil temperature reduction.