Leukocytes and other circulating cells deform and move relatively to the channel flow in the lateral and translational directions. Their migratory property is important in immune response, hemostasis, cancer progression, delivery of nutrients, and microfluidic technologies such as cell separation and enrichment, and flow cytometry. Using our three-dimensional computational algorithm for multiphase viscoelastic flow, we have investigated the effect of pairwise interaction on the lateral and translational migration of circulating cells in a microchannel. The numerical simulation data show that when two cells with the same size and small separation distance interact, repulsive interaction take place until they reach the same lateral equilibrium position. During this process, they undergo swapping or passing, depending on the initial separation distance between each other. The threshold value of this distance increases with cell deformation, indicating that the cells experiencing larger deformation are more likely to swap. When a series of closely spaced cells with the same size are considered, they generally undergo damped oscillation in both lateral and translational directions until they reach equilibrium positions where they become evenly distributed in the flow direction (self-assembly phenomenon). A series of cells with a large lateral separation distance could collide repeatedly with each other, eventually crossing the centerline and entering the other side of the channel. For a series of cells with different deformability, more deformable cells, upon impact with less deformable cells, move to an equilibrium position closer to the centerline. The results of our study show that the bulk deformation of circulating cells plays a key role in their migration in a microchannel.