A physical model for compressible flows with phase transition is described, in which all the processes of phase transition, i.e. nucleation, droplet growth, droplet evaporation and de-nucleation, are incorporated. The model is focused on dilute mixtures of vapour and droplets in a carrier gas with typical maximum liquid mass fraction smaller than 0.02. The new model is based on a reinterpretation of Hill's method of moments of the droplet size distribution function. Starting from the general dynamic equation, it is emphasized that nucleation or de-nucleation correspond to the rates at which droplets enter or leave droplet size space, respectively. Nucleation and de-nucleation have to be treated differently in agreement with their differences in physical nature. Attention is given to the droplet growth model that takes into account Knudsen effects and temperature differences between droplets and gas. The new phase transition model is then combined with the Euler equations and results in a new numerical method: ASCE2D. The numerical method is first applied to the problem of shock/expansion wave formation in a closed shock tube with humid nitrogen as a driver gas. Nucleation and droplet growth are induced by the expansion wave, and in turn affect the structure of the expansion wave. When the main shock, reflected from the end wall of the low-pressure section, passes the condensation zone, evaporation and de-nucleation occur. As a second example, the problem of the flow of humid nitrogen in a pulse-expansion wave tube, designed to study nucleation and droplet growth in monodisperse clouds, is investigated experimentally and numerically.