Laser aided Directed Material Deposition (DMD) is an additive manufacturing process based on laser cladding. A full understanding of laser cladding is essential in order to achieve a steady state and robust DMD process. A two dimensional mathematical model of laser cladding with droplet injection was developed to understand the influence of fluid flow on the mixing, dilution depth, and deposition dimension, while incorporating melting, solidification, and evaporation phenomena. The fluid flow in the melt pool that is driven by thermal capillary convection and an energy balance at the liquid–vapor and the solid–liquid interface was investigated and the impact of the droplets on the melt pool shape and ripple was also studied. Dynamic motion, development of melt pool and the formation of cladding layer were simulated. The simulated results for average surface roughness were compared with the experimental data and showed a comparable trend.