This study focuses on the investigation of interaction mechanism between surface acoustic wave (SAW) and micro-droplets of volumes (1-30µl) by means of experiments and numerical simulations, and reports the achievements on three-dimensional acoustic streaming and mixing dynamics. Quantitative evidence was provided for the existence of strong nonlinear nature of flow inertia in this SAW-driven flow when the strength of the acoustic force is larger than 0.01 time of surface tension. A new parameter F/NA = Fλ /(σ/Rd) was defined to characterise this nature, where F is the acoustic body force, λ the SAW wavelength, σ the surface tension, and Rd the droplet radius. In contrast to the widely used Stokes model of acoustic streaming which generally ignores such a nonlinearity, it was identified that the full Navier-Stokes equation must be applied when FNA > 0.01 to avoid errors up to 93 % between the computed streaming velocities and those from experiments as in the nonlinear case. It is suggested that the Stokes model is valid when F/NA < 0.002. For an FNA ranges between 0.002 and 0.01, the errors were found to be 5% and 20%, respectively. Furthermore, it was demonstrated that the increase of F/NA > 0.45 induces not only strong nonlinear internal streaming, but also the deformation of droplets. Effect of SAW excitation frequency on streaming and mixing in the droplets is also investigated in this study. It has been shown that SAW excitation frequency influences the SAW attenuation length, lSAW, and hence the acoustic energy to be absorbed by the droplet. It has been observed that the ratio of droplet radius to SAW attenuation length (Rd /lSAW) plays an important role on SAW streaming. When Rd / lSAW ≤ 1, fast and efficient mixing process can be achieved, even at the lowest RF power of 0.05 mW supplied. However, when Rd /lSAW exceeds a critical value of 1, weaker acoustic streaming was observed, which leads to a less effective acoustic mixing. An investigation on the scaling effects in the flow hydrodynamic by SAWs in confined microdroplets between a LiNbO3 substrate and a top glass plate showed that, the ratio of the gap height to SAW attenuation length, (H /lSAW), is an important parameter affecting the streaming flow induced in this confined microdroplet. At a given SAW power and frequency, the results showed that, an increase in H /lSAW results in an increase of streaming velocity; however, if H /lSAW exceeds 0.7, the streaming velocity decreases.