The field equations for two-phase flow in the computer code TRAC/ RELAP Advanced Computational Engine or TRACE are examined to determine their validity, their capabilities and limitations in resolving nuclear reactor safety issues. TRACE was developed for the NRC to predict thermohydraulic phenomena in nuclear power plants during operational transients and postulated accidents. TRACE is based on the rigorously derived and well-established two-fluid field equations for 1-D and 3-D two-phase flow. It is shown that: (1) The two-fluid field equations for mass conservation as implemented in TRACE are wrong because local mass balances in TRACE are in conflict with mass conservation for the whole reactor system, as shown in Section 3.1. (2) Wrong equations of motion are used in TRACE in place of momentum balances, compromising at branch points the prediction of momentum transfer between, and the coupling of, loops in hydraulic networks by impedance (form loss and wall shear) and by inertia and thereby the simulation of reactor component interactions. (3) Most seriously, TRACE calculation of heat transfer from fuel elements is incorrect for single and two-phase flows, because Eq. (3-4) of the TRACE Manual is wrong (see Section 5.2). (4) Boundary conditions for momentum and energy balances in TRACE are restricted to flow regimes 1 1 For classification of two-phase flow regimes see Delhaye et al. (1981, p. 47). with single-phase wall contact because TRACE lacks constitutive relations for solid–fluid exchange of momentum and heat in prevailing flow regimes. Without a quantified assessment of consequences from (3) to (4), predictions of phasic fluid velocities, fuel temperatures and important safety parameters, e.g., peak clad temperature, are questionable. Moreover, TRACE cannot predict 3-D single- or two-phase flows because: (5) incorrectly averaged equations are used for 3-D predictions, (6) fluid shear is ignored but needed to predict counter-current flows with the two-fluid model, and (7) fictitious body forces and fictitious distributed mass and heat sources are used to replace contact forces at the wall, mass injection and wall heat fluxes in 3-D mass, momentum and energy equations for both phases. No modeling error estimates are given in the TRACE Manual. (8) Imposed perfect mixing in every control volume causes artificial damping and disables TRACE to track reliably propagation of thermal and kinematic disturbances, thereby adversely affecting the prediction of nuclear fuel temperature. (9) According to its manual, TRACE relies on numerical diffusion far greater than physical dissipation by turbulence, to solve TRACE's ill-posed field equations and to compensate for missing fluid shear. TRACE with scale-sensitive numerical diffusion is tuned to match data from small-scale experiments. TRACE is therefore not reliable for analyzing full-size power plants. Numerical diffusion could also reduce the ability of TRACE to predict the onset of instability for reactors or test facilities entering large power and flow oscillations. Agreements of TRACE code results with experimental data from test facilities with isolated full-size components or with data from reduced-size integral-effect tests may be achieved by adjusting numerous coefficients, some of them scale-dependent (i.e., by tuning with documented non-physical coefficients in momentum balances, by spurious time-averaging (through time step adjustment) of algebraic boundary conditions, by built-in, non-physical space grid tuning in momentum balances and in mixture level predictions). Such results may not be applied reliably to full-size systems with realistic interactions between reactor components. TRACE may not be applicable to predict the outcome of postulated accidents for which validations are not possible (e.g., Anticipated Transients without Scram). New experimental techniques are needed first for closure of the two-fluid model. A new approach to TRACE modeling is needed. Recommendations are given for improved code documentation.