Military rotorcraft operations have grown in mission capability such that these aircraft are critical components in numerous combat and non-combat missions. Simulation provides a valuable tool for training aircrews and ground personnel during mission rehearsal of rotorcraft operations, which at times can involve coordination between multiple personnel. A critical aspect of ensuring that personnel receive effective training is the inclusion of physics-based models that account for the effects of rotorcraft operations, in particular, the effects of rotorwash, on the simulated environment. These effects have become more critical with the use of heavy lift rotorcraft and tiltrotors, which may potentially introduce a significant rotorwash hazard to ground personnel. It is highly desirable to identify enhanced models for rotorwash effects in simulation to yield highly effective training environments. This paper describes initial work on an advanced simulation capability for modeling helicopter rotorwash effects in a dynamic virtual training environment. The central element is a real-time, physically-based rotorwash model that is used to capture interactions between the helicopter and environment. A proof-of-concept rotorwash physics engine has been developed that simulates the response of dynamic objects (including rigid bodies and flexible objects such as cables) due to flight operations near the ground and ship flight decks. By using a physics-based approach, it is possible to represent the dynamic environment and provide proper training cues over a broad range of operational scenarios. The paper discusses the rotorwash physics engine development that combines an advanced rotorcraft flow model with a commercial off the shelf (COTS) multi-body physics engine. Results from representative applications are provided, including an application that presents regions of potential rotorwash hazards in a simplified manner for ground personnel training.