Simulation is a modeling technique that is widely used in such areas as policymaking, manufacturing, computer system design, and military analysis. In spite of its widespread use, current simulation technology suffers from a number of serious drawbacks that limit its power, applicability, and credibility. The Knowledge-Based Simulation (KBSim) project at RAND is engaged in research aimed at producing a new-generation simulation environment that will greatly extend the capabilities of current simulation technology, particularly as applied to analytic modeling. The KBSim project has focused on reasoning in simulation, representation of multiple relations among simulated entities, highly interactive interfaces, sensitivity analysis, variation of the aggregation level of a model, and the modeling of "soft" concepts such as initiative. This Note describes the KBSim project, discusses its goals, and presents an overview of its progress.