Downhole separation method is installed in the bottom of an oil well. It separates oil and water in the well bore. The oil-rich stream is produced to the surface, while the water-rich stream is pumped directly to an injection formation without ever coming to the surface. Two basic methods of separation are available such as hydrocyclones and gravity separation. Hydrocyclones use centrifugal force to separate fluids of different specific gravity. This does not involve any moving parts. A mixture of oil and water enters the hydrocyclone at a high velocity from the side of a conical chamber. It is designed with electric submersible pumps, progressive cavity pumps and rod pumps. Gravity separator-type systems are designed to allow the oil droplets that enter a well bore through the perforations to rise and form a discrete oil layer in the well.