This article develops a new technique of reducing exergy losses of external viscous flow over surfaces, based on optimized microchannels embedded within the surface. The rate of entropy production and loss of available optimized energy are formulated by an integral solution and modified Blasius profiles of boundary layer flow. The optimized number of microchannels, width and height of each microchannel and spacing between microchannels involve a selective compromise between added heat exchange due to surface area, together with reduced friction through slip conditions within each microchannel. Mixed Knudsen numbers across each rnicrochannel require simultaneous modelling of both slip-flow and no-slip conditions at the wall. Results involving the minimal entropy production and optimized microchannel profiles are presented and compared to other benchmark results involving classical macro-scale configurations. Copyright (c) 2005 John Wiley & Sons, Ltd.