Abstract - This paper describes a novel numerical algorithm for simulating interfacial dynamics of non-Newtonian fluids. The interface between two immiscible fluids is treated as a thin mixing layer across which physical properties vary steeply but continuously. The property and evolution of the interfacial layer is governed by a phase-field variable φ that obeys a Cahn-Hilliard type of convection-diffusion equation. This circumvents the task of directly tracking the interface, and produces the correct interfacial tension from the free energy stored in the mixing layer. Viscoelasticity and other types of constitutive equations can be incorporated easily into the variational phase-field framework. The greatest challenge of this approach is in resolving the sharp gradients at the interface. This is achieved by using an efficient adaptive meshing scheme governed by the phase-field variable. The finiteelement scheme easily accommodates complex flow geometry and the adaptive meshing makes it possible to simulate large-scale two-phase systems of complex fluids. In twodimensional and axisymmetric three-dimensional implementations, the numerical toolkit is applied here to drop deformation in shear and elongational flows, rise of drops and retraction of drops and torii. Some of these solutions serve as validation of the method and illustrate its key features, while others explore novel physics of viscoelasticity in the deformation and evolution of interfaces.