Direct cell-cell communication can occur through various chemical and mechanical signals. However, available cell culture systems lack single-cell resolution and are often limited by sensitivity and accuracy. In this study, we present an accurate, efficient and controllable microfluidic device that can be used for in situ monitoring of natural cell-cell contact and signaling processes in a confined microenvironment. This innovative static droplet array (SDA) enables highly efficient trapping, encapsulation, arraying, storage, and incubation of defined cell populations. For proof-of-principle experiments, we monitored the response of budding yeast to peptide mating pheromones, as it is one of the best understood examples of eukaryotic cell-cell communication. Specifically, we measured the yeast response to varying concentration of synthetic MATα-type mating factor, as well as varying the cell number ratio of MATα and MATa in a confined space. We found clear morphological and doubling-time changes during the mating reaction with a significantly higher accuracy than conventional methods. Further, phenotypic analysis of data generated with the microfluidic static droplet array allowed distinguishing the function of genes in yeast mutants defective for different aspects of pheromone signaling. Taken together, the microfluidic platform provides a valuable research tool to study cell-cell communication and signaling in a controlled microenvironment with the sensitivity and accuracy required for screening and long-term phenotypic analysis.