A new approach is developed to study the dynamics of the localized process in solutions and other condensed phase systems. The approach employs a fluctuating elastic boundary (FEB) model which encloses the simulated system in an elastic bag that mimics the effects of the bulk solvent. This alleviates the need for periodic boundary conditions and allows for a reduction in the number of solvent molecules that need to be included in the simulation. The boundary bag is modeled as a mesh of quasi-particles connected by elastic bonds. The FEB model allows for volume and density fluctuations characteristic of the bulk system, and the shape of the boundary fluctuates during the course of the simulation to adapt to the configuration fluctuations of the explicit solute-solvent system inside. The method is applied to the simulation of a Lennard-Jones model of liquid argon. Various structural and dynamical quantities are computed and compared with those obtained from conventional periodic boundary simulations. The agreement between the two is excellent in most cases, thus validating the viability of the FEB method.