The SACOS code is thermal-hydraulic subchannel analysis code designed to meet steady-state conditions and operational transients in different types of reactor cores. It uses a homogeneous flow or drift-flux model to simulate single-phase and two-phase flow characteristics. In order to achieve a more refined two-phase flow modeling for LWR cores, a new eight-equation two-fluid based analysis module of SACOS is developed in this study. The phasic equations for mass continuity, momentum, and energy are spatially discretized by the finite volume method (FVM) with a staggered grid structure. To reduce numerical diffusion and improve numerical accuracy, the high-resolution scheme with nonlinear flux limiter is implemented. The code assessment is performed with linear advection flow problem and the preliminary code validation is presented by comparing with the experimental results of Weiss 14 × 14 blockage test, CNEN 4 × 4 mixing test, Studsvik 3 × 3 mixing test, and ISPRA 4 × 4 mixing test covering single/two-phase and unheated/heated conditions. The application of SACOS implies that the code can be used to model and perform assembly-level core safety analysis with visualization capabilities for hexagonal and rectangular geometry. Development of a two-fluid based thermal-hydraulic subchannel analysis code and its application. Display omitted •A new eight-equation two-fluid based analysis module of SACOS is developed.•The high-resolution scheme with nonlinear flux limiter is implemented into code.•The validity of the higher-order scheme is verified with linear advection flow problem.•The two-fluid model is validated based on reported bundle experiments.