Abstract: The existing simulators will cost dear when simulating an overlay network which is extending with relevant nodes taking dynamically part in the simulation. A DEVS-based distributed parallel simulation algorithm is therefore proposed to simulate the overlay network protocols, and it has been used to evaluate the performance of layered overlay multicast network (LOMN). According to the overlay network protocols defined by users and their application requests, the algorithm is described to produce several discrete event payloads and dispense them to the simulator on different hosts, then the cooperative simulation jobs are executed in a parallel way. Compared with the simulator models at data packet levels, the algorithm has advantages of reducing the simulating cost and more adaptable to simulating the large-scale and dynamic overlay network protocols and applications. It is available to solve better the challenges the overlay network simulation is facing: scalability and dynamic change of network.