Parallel simulation of unsteady turbulent combustion is carried out for a range of precursor test problems leading to the development of a new methodology for reacting two-phase flows. Simulations are carried out using large-eddy simulations (LES) which allows full spatio-temporal resolution of all scales larger than the grid resolution with the unresolved small-scales modeled by a localized dynamic one-equation subgrid models. For two-phase applications, Lagrangian tracking of a range of droplets is carried out and is fully coupled to the Eulerian gas phase flow. An extension of this approach to accurately deal with small-scale scalar mixing and chemical reactions has been carried out using an innovative model that is implemented within each LES cell, to account for the effects of small-scale mixing and molecular diffusion on the chemical processes. The first year's effort focused on validating this methodology using both simple and complex test configurations. Highly optimized parallel LES codes are used for these studies. In addition to parallel scaleup data, results discussed in this paper include stagnation point premixed flame, opposed jet diffusion flame, highly swirling premixed flame in a General Electric combustor and two-phase mixing and vaporization in mixing layers. Comparison with experimental data wherever possible, clearly demonstrates the unique capabilities of the new subgrid combustion LES model.