In the lower and medium power range, twin-screw machines offer a high potential for energy conversion in various compressor applications with liquid injection or as expanders with respect to electrical power generation from regenerative and exhaust heat sources in trilateral or wet Rankine cycle systems, for instance. Aiming high efficiencies and reliability, the design of liquid-flooded twin-screw machines as a critical system component presents particular challenges for the engineers. Hence, reliably representative simulations to guide design are mandatory. In this context, this study presents a two-phase approach for simulation of the operational behaviour of water-flooded twin-screw machines. The thermodynamic fluid state is calculated using the humid air model that considers the two-phase mixture in thermal equilibrium. Additionally, dissipative two-phase mass flow rates are predicted regarding a slip-flow model and two-phase discharge coefficients. The proposed two-phase approach including liquid distribution in the working chamber is validated for expander applications considering available experimental data of the test twin-screw expander SE 51.2 in terms of indicator diagrams, indicated power, mass flow rate, and outlet temperature.