This paper presents a hybrid approach for integrating fundamental process knowledge with measurement data to soft sensor development with improved estimation capability. Measurement data from sensors are collected and used as inputs for a first-principles model to emulate the data close to restrictions of the operating regulations, thus addressing a low variability problem of the inputs. Next, variables from measurement data and results of the first-principles modeling are combined to extend training dataset for soft sensor which becoming of a hybrid type in nature. To improve an estimation capability, cascade-forward neural network and algorithm for alternating conditional expectation for nonparametric soft sensor development was used. It was shown that the estimation capabilities of the developed soft sensor can be improved by extending the training dataset with first-principles model data approximating the upper and lower limits of the process regime, the amount of which does not exceed 21%. As a result, designed hybrid soft sensor demonstrates a better efficacy in predicting quality index of the targeted distillation product with significantly reduced mean absolute error.