An underwater explosion near a free surface constitutes an explosive gas–water–air system with a shock and free surface interactionand the presence of bulk cavitation region. This paper applies a simplified modified ghost fluid method [T.G. Liu, et al., Comm.Comput. Phys. 1 (2006) 898] to simulate the explosive gas–water and water–air interfaces and an isentropic one-fluid cavitationmodel [T.G. Liu, et al., J. Comput. Phys. 201 (2004) 80] to describe and capture the unsteady cavitation just below the free surface.It is found that the proposed ghost fluid method can accurately simulate the gas–water/water–air compressible flows with the waveinteraction at the interfaces and the deformation of the free surface. The isentropic one-fluid cavitation model, on the other hand,is capable of simulating the dynamic creation and evolution of the bulk cavitation below the free surface.