Rigorous simulation of electromagnetic scattering from wafer topography has been achieved using the massively parallel Connection Machine CM‐2. The program, based on a finite‐difference time domain algorithm, can be applied to key structures in lithography and alignment with interpenetrating, isolated, or nonperiodic layers while incorporating dynamic effects such as bleaching of photoresist. The accuracy of the program is demonstrated by comparison with results from diffraction gratings analyzed by integral equation methods and by sample simulations of exposure and reflection from dielectric films. Several prototypical two‐dimensional problems are explored to demonstrate the capabilities of the method including asymmetry effects in alignment, dynamic exposure near reflective steps, and diffraction in contrast enhancement materials. Steady‐state calculations for a 20 λ by 10 λ structure are shown to require approximately 75 s on a prototype 1K processor system with projected performance of <5 s on a fully configured 32K (or larger) machine.