EDM and micro-EDM have been successfully applied in industries and laboratories for decades, due to their ability to machine difficult-to-cut materials and generate complex shapes of macro to micro scales. However the fundamental issues such as the craters formation mechanism during the discharge, are still not yet been fully understood. In this paper a comprehensive model has been introduced to simulate the crater formation process in micro-EDM. The heat transfer and fluid flow within the melt pool have been studied simultaneously, which is one step forward of previous works. Marangoni convection has been considered is the main contribution to the crater formation. This model not only provides the temperature distribution and velocity fields but also shows the process of the crater formation and gives the crater profile. Moreover, this model can also be used to predict the thickness of the recast layer and heat affected zone, which are crucial parameters for post processing. Experimentally identified parameters are applied for simulations. The study shows that the proposed model offers close predictions.