The direct simulation Monte Carlo (DSMC) method is the primary numerical technique for analysis of rarefied gas flows. While recent progress in computational chemistry is beginning to provide vibrationally resolved transition and reaction cross sections that can be employed in DSMC calculations, the particle nature of the standard DSMC method makes it difficult to use this information in a statistically significant way. The current study introduces a new technique that makes it possible to resolve all of the vibrational energy levels by using a master equation approach along with temperature-dependent transition rates. The new method is compared to the standard DSMC technique for several heat bath and shock wave conditions and demonstrates the ability to resolve the full vibrational manifold at the expected overall rates of relaxation. The ability of the new master equation approach to the DSMC method for resolving, in particular, the high-energy states addresses a well-known, longstanding deficiency of the standard DSMC method.