In the later stage of oil field exploitation, the lifting water quantity is increasing and the cost of surface water treatment is increasing, which brings heavy burden to the economic benefit of oil field. In view of the large radial size and long axial size of the double tangential inlet hydrocyclone which is not suitable for the downhole oil–water separation and injection production system of the same well with large displacement produced liquid, a new type of arc vane hydrocyclone with axial-flow inlet is proposed. By using numerical simulation analysis, the flow field distribution pattern and fluid migration law in the new hydrocyclone are studied, and the velocity vector, pressure loss and oil–water two-phase separation mechanism in the hydrocyclone separation process are clarified. The results show that the axial inlet structure can avoid the "screen phenomenon" to the greatest extent, effectively guarantee the symmetrical distribution trend in the process of fluid movement, facilitate the stability of the swirling flow field, facilitate the swirling separation of oil–water two-phase media, and improve the separation efficiency of the hydrocyclone. The highest separation efficiency of the arc vane hydrocyclone is over 98%. In addition to the advantages of high separation efficiency, the space size of the arc vane hydrocyclone is also small. When it is applied to the downhole oil–water separation technology, it can minimize the surface produced liquid volume, reduce the input of surface facilities and labor costs, and provide a new idea for the sustainable development of the oilfield, cost reduction and efficiency increase.