This paper reports a novel, physiologically significant, microfluidic phenomenon generated by nanomolar concentrations of drag-reducing polymers (DRP) dissolved in flowing blood, which may explain previously demonstrated beneficial effects of DRP on tissue perfusion. In microfluidic systems used in this study, DRP additives were found to significantly modify traffic of red blood cells (RBC) into microchannel branches as well as reduce the near-wall cell-free layer, which normally is found in microvessels with a diameter smaller than 0.3 mm. The reduction in plasma layer size led to attenuation of the so-called “plasma skimming” effect at microchannel bifurcations, increasing the number of RBC entering branches. In vivo, these changes in RBC traffic may facilitate gas transport by increasing the near vessel wall concentration of RBC and capillary hematocrit. In addition, an increase in near-wall viscosity due to the redirection of RBC in this region may potentially decrease vascular resistance as a result of increased wall shear stress, which promotes endothelium mediated vasodilation. These microcirculatory phenomena can explain the previously reported beneficial effects of DRP on hemodynamics in vivo observed in many animal studies. We also report here our finding that DRP additives reduce flow separations at microchannel expansions, deflecting RBC closer to the wall and eliminating the plasma recirculation zone. Although the exact mechanism of the DRP effects on RBC traffic in microchannels is yet to be elucidated, these findings may further DRP progress toward clinical use.