Objective: With the rapid development of high-power electronic devices, microchannel thermal management systems have attracted widespread attention due to their high efficiency and compact structure. They are also widely used in digital polymerase chain reaction chips, fuel cells, and pharmaceutical microreactors. Owing to the multiphase flow in microchannels, such systems exhibit outstanding heat transfer performance. In particular, liquid–liquid slug flows achieve Nusselt numbers that are 400% higher than those of single-phase flows with better flow stability. However, manufacturing roughness inevitably and substantially changes the actual complex flow patterns and heat transfer characteristics. Most previous studies adopted ideal smooth-wall assumptions, thereby ignoring the effects of actual surface roughness on liquid–liquid slug flows and the coupled thermal behaviors of such flows in real-world applications. This study aims to systematically explore how random wall roughness affects slug flow dynamics and heat transfer in small-diameter co-flow microchannels, clarify the influence of key roughness parameters (including relative height and correlation length), and further reveal the underlying mechanisms to support effective engineering design and optimization of microchannel-based thermal management devices. Methods: A two-dimensional axisymmetric numerical model was built in Fluent using the fixed reference frame and the volume-of-fluid interface-capturing method. The continuous surface force model was used to simulate interfacial tension, and the pressure implicit with splitting of operator (PISO) algorithm was adopted for pressure–velocity coupling. Random wall roughness was generated via a Gaussian distribution approach to mimic real machining errors. Grid independence and model reliability were verified by comparing simulation results with published experimental data on flow velocity, liquid film thickness, and Nusselt number. Toluene and water were used as working fluids with equal superficial velocities of 0.125 m/s, and a constant heat flux of 50 kW/m² was applied to the channel wall. A fast Fourier transform was adopted to analyze the slug generation frequency. The flow velocity field, slug movement characteristics, temperature distribution, and heat transfer performance under different roughness parameters were systematically studied. Results: Rough walls reduce the effective flow area and increase the internal flow velocity significantly. The maximum slug generation frequency in rough channels was 16.3% higher than that in smooth channels. The developed wall area of rough surfaces was up to 30% larger than that of smooth walls, greatly enhancing the heat transfer interface. The wall temperature and average fluid temperature were notably higher in rough microchannels. Roughness height has a more prominent effect on flow and heat transfer than correlation length, whose influence saturates when the roughness distribution reaches a certain density. Slugs in rough channels travel at least 6% farther than those in smooth channels over the period of 6.0–26.5 ms, and the heat transfer coefficient increases by up to 12% as roughness height increases. Conclusions: Random wall roughness accelerates slug formation and enhances heat transfer by narrowing the flow area and disturbing the near-wall flow field. Roughness height plays a dominant role in regulating flow and thermal performance, while correlation length has a limited and saturable effect. These findings provide clear theoretical support and practical guidance for the design and optimization of microchannel thermal management devices and can guide the formulation of reasonable machining tolerance standards to balance manufacturing cost and thermal performance. Furthermore, the findings can help in properly controlling surface roughness to achieve better thermal efficiency in real industrial applications, laying the foundation for further research on roughness-optimized microchannel structures.