This paper presents a theoretical, experimental, and numerical study of cavitation bubble dynamics inside a droplet suspended in another host fluid. Theoretical analysis provides a modified Rayleigh collapse time and natural frequency for spherical bubbles, characterized by the density ratio between the two liquids and the bubble-to-droplet size ratio. Experimental results show two distinct fluid-mixing mechanisms in O/W and W/O systems. In O/W systems, a liquid jet forms during bubble collapse, penetrating the droplet interface. In W/O systems, the bubble traverses the droplet, inducing global motion and eventual droplet pinch-off when the local Weber number exceeds a critical value. A boundary integral model accurately reproduces the essential physics of nonspherical bubble dynamics. Parametric studies reveal the dependence of bubble-droplet interactions on governing parameters. The study has implications for ultrasonic emulsification, pharmacy, and other applications. Key findings include the identification of a novel fluid mixing mechanism in W/O systems and the influence of the bubble-to-droplet size ratio and density ratio on bubble dynamics. The results highlight the importance of understanding bubble-droplet interactions for practical applications.This paper presents a theoretical, experimental, and numerical study of cavitation bubble dynamics inside a droplet suspended in another host fluid. Theoretical analysis provides a modified Rayleigh collapse time and natural frequency for spherical bubbles, characterized by the density ratio between the two liquids and the bubble-to-droplet size ratio. Experimental results show two distinct fluid-mixing mechanisms in O/W and W/O systems. In O/W systems, a liquid jet forms during bubble collapse, penetrating the droplet interface. In W/O systems, the bubble traverses the droplet, inducing global motion and eventual droplet pinch-off when the local Weber number exceeds a critical value. A boundary integral model accurately reproduces the essential physics of nonspherical bubble dynamics. Parametric studies reveal the dependence of bubble-droplet interactions on governing parameters. The study has implications for ultrasonic emulsification, pharmacy, and other applications. Key findings include the identification of a novel fluid mixing mechanism in W/O systems and the influence of the bubble-to-droplet size ratio and density ratio on bubble dynamics. The results highlight the importance of understanding bubble-droplet interactions for practical applications.