A hybrid method based on Navier-Stokes equation and free wake analysis is deveLoped for studying the aerodynamic and acoustic characteristics of rotor blade-vortex interaction (BVI). In this method, the flow field is divided into two zones, a Navier-Stokes code is used to model the tip vortex formation around the blade, while a free wake model is employed in vortex transport area, to account for the effect of the far wake. The noise prediction is based on the well-known FW-H equation. By this developed method, the aerodynamic loading and acoustic calculations are performed for the AH-1/OLS rotor in the BVI condition. The present method is validated by comparison of the pressure time history with the available experimental data. Furthermore, the BVI noise propagation characteristic is studied. The results indicate that, the BVI phenomena will occur at several azimuthal angles on the rotor in the descent flight condition. With more blades, the number of interactions is markedly increased. The noise has strong directivity, and radiates toward the low and front of blades on the advancing side. The sound pressure level of BVI noise has linearly inverse relationship with observer distance.