AbstractSimulating dynamic rupture of fault systems can be computationally demanding, as it requires reproducing complex fault geometry and accurately capturing waves propagating away from the rupture front. It is in particular challenging to predict an initial stress state consistent with fault geometries, heterogeneous distribution of surrounding materials, and far‐field tectonic loading. While standard techniques such as contact analysis and Lagrangian multipliers can be used to model the fault, it can lead to significant computational overhead in FEM. We extended Particle Discretization Scheme‐FEM, which provides numerically efficient crack treatment, without requiring contact analysis, to simulate dynamic fault rupture as a frictional crack propagating along a pre‐existing shear crack surface. Initial stress, which is consistent with initial frictional forces, material distribution and fault geometry, is derived using Coulomb friction and far‐field boundary conditions. The study first demonstrates the ability of the numerical method to reproduce a 2D ideal supershear scenario, and the underlying Burridge‐Andrew rupture mechanism. The methodology is then applied to the large scale simulation of the 2018 Palu earthquake on the Palu‐Koro fault. The simulation successfully reproduces the early and sustained supershear rupture which was observed for the Palu earthquake. Also, it indicates that the presence of an off‐fault damage zone can contribute to the low rupture velocity measured during the earthquake. Unlike sub‐Rayleigh earthquakes, the shockwave propagation was observed to lead to significant amplitudes of the ground motion even far from the fault.