Improved two step in-situ polymerization was applied in the preparation of urea- formaldehyde microcapsules used in microencapsulated electrophoretic display. The dispersion liquid which nano particles of titanium dioxide and carbon black dispersed in tetrachloroethylene was used as the electrophoretic liquid, and the electrophoresis microcapsules was prepared by urea-formaldehyde system. Melamine was used to modify the urea-formaldehyde microcapsules. The effect of different mole rates of urea and melamine to the surface morphology, mechanical strength, and sphericity of the microcapsules were studied. Electrophoretic performance of particles in melamine-urea-formaldehyde (MUF) microcapsules and urea-formaldehyde (UF) microcapsules were contrasted under the same condition. The results showed that as adding melamine in urea-formaldehyde, the time used to prepare microcapsules was shorter, and microcapsules were not easy aggregation during long time storage. When the mole rates of melamine and urea were from 2:8 to 5:5, the microcapsules with smoother surface (Fig.1), stronger mechanical strength and higher transmittance were obtained. Electrophoretic behaviors of particles in MUF (melamine and urea was 2:8 in mole rate) and UF microcapsules were tested under the same condition, respectively. It was shown that particles in MUF microcapsules could be seen significantly moving at the electric field of 10 V/mm, and the response time of these particles was 500 ms at the electric field of 20 V/mm，and it was shorter than 200 ms at the 50 V/mm electric field (Fig.2). On the contrast, the response time of particles in UF microcapsules was greater than 10 s at the electric field of 20 V/mm.