We report an experimental study concerning the capillary relaxation of a confined liquid droplet in a microscopic channel with rectangular cross-section. The confinement leads to a droplet that is extended along the direction normal to the cross-section. These droplets, found in numerous microfluidic applications, are pinched into a peanut-like shape thanks to a localized, reversible deformation of the channel. Once the channel deformation is released, the droplet relaxes back to a plug-like shape. During this relaxation, the liquid contained in the central pocket drains towards the extremities of the droplet. Modeling such visco-capillary droplet relaxation requires considering the problem as 3D due to confinement. This 3D consideration yields a scaling model incorporating dominant dissipation within the droplet menisci. As such, the self-similar droplet dynamics is fully captured.