Microfluidic technologies offer an exceptional level of control over the flows of multiple fluids at micrometer scales; this enables the high-throughput production of many monodisperse, picoliter-volume emulsion drops as well as precise control of materials behaviors at liquid-liquid interfaces. These drops provide a means of encapsulating an active material within a precisely controlled environment that allows fabrication of smart materials and designing novel biochemical assays. In the first part of my talk, I will focus on using emulsion drops generated in microfluidics as templates to fabricate functional polymeric microcapsules and microparticles that respond to a range of environmental stimuli in prescribed ways. In addition, taking advantage of material behaviors at liquid-liquid interfaces enables engineering complex soft materials with hierarchical orders for novel functionalities; I will demonstrate how we modulate permeability of polymeric membranes produced by microfluidics. In the second part, I will demonstrate how we can utilize drops as vessels for biological reactions. Since large numbers of these drops are produced and screened quickly, this approach overcomes the limitations of current screening technologies. I will show how we exploit these advantages to use microfluidics for developing new peptide-based drugs.