In conventional models for two-phase reactive flow of interior ballistic, the dynamic collision phenomenon of particles is neglected or empirically simplified. However, the particle collision between particles may play an important role in dilute two-phase flow because the distribution of particles is extremely nonuniform. The collision force may be one of the key factors to influence the particle movement. This paper presents the CFD-DEM approach for simulation of interior ballistic two-phase flow considering the dynamic collision process. The gas phase is treated as a Eulerian continuum and described by a computational fluid dynamic method (CFD). The solid phase is modeled by discrete element method (DEM) using a soft sphere approach for the particle collision dynamic. The model takes into account grain combustion, particle-particle collisions, particle-wall collisions, interphase drag and heat transfer between gas and solid phases. The continuous gas phase equations are discretized in finite volume form and solved by the AUSM+-up scheme with the higher order accurate reconstruction method. Translational and rotational motions of discrete particles are solved by explicit time integrations. The direct mapping contact detection algorithm is used. The multigrid method is applied in the void fraction calculation, the contact detection procedure, and CFD solving procedure. Several verification tests demonstrate the accuracy and reliability of this approach. The simulation of an experimental igniter device in open air shows good agreement between the model and experimental measurements. This paper has implications for improving the ability to capture the complex physics phenomena of two-phase flow during the interior ballistic cycle and to predict dynamic collision phenomena at the individual particle scale.