This paper reports a microreaction technology for biochemical assay using nanoliter droplets encapsulated inside oil droplets. Microreaction chambers are constructed on a glass substrate by accumulating oil droplets that are dispensed by the directional droplet ejector. Droplets of different aqueous reagents are then directionally ejected into the oil microchambers for parallel and combinatory analysis. Because the reagents are encapsulated in oil, the evaporation rate is greatly reduced, and only small amount of reagents are required. The microchamber size and reagent amount are digitally controlled by the number of ejected oil and reagent droplets, respectively. Ejectors for oil and reagents have been integrated on a single chip so that each assay is performed efficiently without any mechanical movement and alignment. We have carried out both physical and chemical microreactions with this method, and observed negligible difference (in response) from conventional macroreactions.