A novel, two-way coupled, dusty-gas flow model has been developed in the direct simulation Monte Carlo (DSMC) framework and employed for the dust-dispersion study on lunar surface. In this model, the gas–gas collisions are modeled probabilistically, whereas, grain–grain interactions are computed deterministically. Most importantly, the gas–grain interactions are modeled in a two-way coupled manner through the consideration of momentum and energy exchange between the two phases. The proposed model is validated against the two-phase theoretical relations for a zero-dimensional simulation. The computational model is used to study the dust dispersion problem due to plume impingement on lunar surface. The influence of particle diameter and hovering altitudes on gas and grain phases, and dust transportation are analyzed in the modified DSMC framework. Furthermore, the sensitivity of the two-way coupled gas–grain interaction model is discussed in relation to the one-way coupled model.