Rapid intensity change in tropical cyclones is one of the most difficult problems in hurricane prediction today. Hurricane Lili (2002) went through a rapid intensification (from category 2 hurricane to a category 4 in 18 hours) followed by a rapid weakening (from category 4 hurricane to a category 1 in 12 hours) before landfall at the Louisiana coast. None of the operational numerical weather prediction (NWP) models were able to forecast the rapid intensity change in Hurricane Lili. The objective of this study is to understand the physical processes affecting the rapid intensity change in Hurricane Lili. We used the 5th generation, high resolution, non-hydrostatic, PSU-NCAR Mesoscale Model (MM5) to simulate Hurricane Lili. Three inner nests (highest resolution of 1.67 km) are following the vortex within a fixed outer domain. The 72 h simulation (0000UTC, October 1st 2002 to 0000UTC, October 4th 2002) uses the 1°x1° National Centers for Environmental Prediction (NCEP) global analysis fields, including sea surface temperature (SST), for initial and lateral boundary conditions. The model simulated storm track is in good agreement with the observed best track. The model adequately reproduced the observed rapid intensification and the weakening of Lili before landfall. The model also captured several key features of the observed storm including the eyewall evolution and the rainfall asymmetry. The simulation showed that the rapid intensification of Hurricane Lili was associated with an eyewall contraction. The analysis of the vertical wind shear revealed that the wind shear played an important role in the weakening of Lili. We are in the process of conducting a more detailed analysis on both the dynamics and thermodynamics of the storm to fully understand the processes affecting Lili's intensity change.