A downhole packer assembly for steam injection and casing pressure testing. The downhole packer assembly includes a housing assembly having intake and discharge ports. A seal assembly is positioned around the housing assembly between the intake and discharge ports and is operable to provide a fluid seal with a casing string. A mandrel is positioned within the housing assembly forming a micro annulus therewith and providing an internal pathway for fluid production therethrough. A valve assembly is disposed between the housing assembly and the mandrel and is operable between closed and open positions by a piston assembly such that the intake and discharge ports and the micro annulus provide a bypass passageway for steam injection around the seal assembly when the valve assembly is open and the seal assembly provides a downhole surface for pressure testing of the casing string uphole thereof when the valve assembly is closed.