A simulation method of dense particle-gas two-phase flow has been developed. The binding force is introduced to present the impact of particle clustering and its expression is deduced according to the principle of minimal potential energy. The cluster collision, break-up and coalescence models are proposed based on the assumption that the particle cluster are treated as one discrete phase. These models are used to numerically study the two-phase flow field in a circulating fluidized bed (CFB). Detailed results of the cluster structure, cluster size, particle volume fraction, gas velocity, and particle velocity are obtained. The correlation between the simulation results and experimental data justifies that these models and algorithm are reasonable, and can be used to efficiently study the dense particle-gas two-phase flow.