This paper presents a novel optofluidic Michelson interferometer based on droplet microfluidics used to create a droplet grating. The droplet grating is formed by a stream of plugs in the microchannel with constant refractive index variation. It has a real-time tunability in the grating period through varying the flow rates of the liquids and index variation via different combinations of liquids. The optofluidic Michelson interferometer is highly sensitive and is suitable for the measurement of biomedical and biochemical buffer solutions. The experimental results show that it has a sensitivity of 66.7 nm per refractive index unit (RIU) and a detection range of 0.086 RIU.