Understanding the multi-physics phenomena associated with blade dynamics constitutes a fundamental factor for the continuous development of wind-turbine technology and the optimization of the efficiency of wind farms. Large size differences between wind-tunnel models and full scale prototypes preclude the proper extrapolation of experimental data, especially when several coupled physical phenomena are acting simultaneously; thus the need of an advanced Virtual Test Environment where innovative designs could be tested at reasonable computational cost. We present a novel approach that we call the Dynamic Rotor Deformation Blade Element Momentum model (DRD-BEM), which effectively takes into account the effects of the complex deformation modes of the rotor structure mentioned above. It is based on a combination of two advanced numerical schemes: First, a model of the structural response of composite blades, which allows full representation of the complex modes of blade deformation at a reduced computational cost; and second, a novel aerodynamic momentum model where all the velocities, forces, and geometrical features involved are transformed by orthogonal matrices representing the instantaneous deformed configuration, which fully incorporates the effects of rotor deformation into the computation of aerodynamic loads. Results of validation cases for the NREL-5MW Wind Reference Turbine are presented and discussed. (C) 2016 Elsevier Ltd. All rights reserved.