The averaged momentum and energy equations for disperse two phase flows are derived by extending a recently developed ensemble averaging method. The resulting equations have a ’two-fluid’ form and the closure problem is phrased in terms of quantities that are amenable to direct numerical simulation. An application of the general theory is given in the dilute limit (first-order in the particle volume fraction), and at low particle Reynolds number. In this case, an analytical closure of the equations free of ad hoc approximations is explicitly given. New effects due to non-uniform particle distribution are identified.