For small Knudsen number, simulation of rarefied gas dynamics by the DSMC method becomes computationally intractable because of the large collision rate. To overcome this problem we have developed a hybrid simulation method, combining DSMC and a fluid dynamic description in a single seamless method. The molecular distribution function f is represented as a linear combination of a Maxwellian distribution M and a particle distribution g; i.e., f = ßM + (1 - ß)g. The density, velocity and temperature of M are governed by fluid-like equations, while the particle distribution g is simulated by DSMC. In addition there are interaction terms between M and g. The coefficient ß is determined automatically, by a thermalization approximation. Numerical results will be presented to demonstrate the validity of this method, as well as the acceleration that it provides over DSMC. Application to various aerodynamic and thermophysics problems will be presented.