The formation mechanism of granules in spray drying process was investigated by DEM-CIP method simulation coupled with a new binder segregation model. To confirm the validity of proposed binder segregation model, experiment on drying of aqueous slurry containing fine particles and binder was performed. The experimental concentration distribution of binder in a dried powder bed agreed well with the simulated one and this result shows that the proposed segregation model is valid to represent segregation phenomenon in the dried granule. Spherical hollow granules were formed with increasing of binder concentration, and the granules were depressed in higher concentration of binder. When the binder concentration in the surface region of a slurry droplet increased during drying, a crust of granule was formed because particle migration was hindered by high fluid viscosity. For the rigid crust layer, granules were hollow. When the crust layer was formed early in drying and its thickness was thin, granule surface partially collapsed inward, whereas the granule resulted in depression granules. (C) 2010 The Society of Powder Technology Japan. Published by Elsevier B.V. and The Society of Powder Technology Japan. All rights reserved.