A new hybrid method based on Euler equation and free wake analysis is developed for studying the aerodynamic and acoustic characteristics of rotor blade-vortex interaction (BVI). In this method, the flowfield of just one blade is solved. An Euler solver is used to capture the effect of near wake and unsteady loading on the blade surface; a free wake model is employed to account for the effect of the far wake. To simplify computation, an effective approach called the generalized grid-velocity approach is presented. The acoustic prediction is based on the well-known FW-H equation. By this method, the aerodynamic loading and acoustic calculations are performed for an AH-1/OLS rotor in the BVI condition. A comparison with available experimental data has validated the present method. Also, the computation results indicate that, the BVI phenomena will occur at several azimuthal angles on the rotor in the descent flight condition, and that BVI loading is mainly caused by the high rate of change of pressure within 10% of the leading edge. The typical BVI noise is impulsive and has strong directivity.