Coalescence of olive oil droplets during malaxation is a crucial phenomenon since it is responsible for the effective oil separation in the following processing steps. Yet it has been scarcely examined. The aim of this work was to study in detail the evolution of droplet size distribution during malaxation in actual processing conditions. For that reason experiments took place in an industrial scale olive oil extraction plant. The effect of malaxation time and the effect of water dilution on the droplet size distribution were examined. The results depict the progressive olive oil droplet coalescence and show a clear effect of water dilution on the rate of coalescence. The higher coalescence rate in the diluted paste was attributed to the decrease in viscosity. Finally it was shown that separation of the diluted paste in a two-phase decanter resulted into smaller droplet sizes (and therefore lower oil content) remaining in the paste.