As traditional liquid bridge model based on Yang-Laplace theory fails to model behaviors of unsaturated granular materials when liquid bridges fuse with each other in funicular and capillary regimes, a method called "Redistribution of Air Volume and Reduction of Liquid Bridge Force" is proposed, and incorporated into the original discrete element method to resolve this issue. Both soil water characteristic curve and suction stress characteristic curve are worked out by the modified discrete element method, the results of which coincide with theoretical solutions for simple cubic packing and tetrahedral packing of granular materials. Furthermore, parameter study shows that soil water characteristic curve depends on effective particle diameter, particle size distribution and packing density. Typical soil water characteristic curves of sand and silt are obtained using the modified method, with a trend similar to that of experiment qualitatively. With the help of Mualem model and Kozeny-Carman equation, permeability is also predicated for granular materials. In particular, the air entry value coincides with or close to those of typical sand and silt in magnitude. Finally, a case study of SWCC prediction for sandy soil is implemented with acceptable results. We may conclude that the modified discrete element method is capable of predicting hydraulic properties of granular materials qualitatively and semi-quantitatively. (C) 2015 Published by Elsevier B.V.