Air sparging is an in situ soil/groundwater remediation technology, which involves the injection of pressurized air through air sparging well below the zone of contamination. To investigate the rate-dependent flow properties during multistep air sparging, a rule-based dynamic two-phase flow model was developed and applied to a 3D pore network which is employed to characterize the void structure of porous media. The simulated dynamic two-phase flow at the pore scale or microscale was translated into functional relationships at the continuum-scale of capillary pressure–saturation (Pc–S) and relative permeability—saturation (Kr–S) relationships. A significant contribution from the air injection pressure step and duration time of each air injection pressure on both of the above relationships was observed during the multistep air sparging tests. It is observed from the simulation that at a given matric potential, larger amount of water is retained during transient flow than that during steady flow. Shorter the duration of each air injection pressure step, there is higher fraction of retained water. The relative air/water permeability values are also greatly affected by the pressure step. With large air injection pressure step, the air/water relative permeability is much higher than that with a smaller air injection pressure step at the same water saturation level. However, the impact of pressure step on relative permeability is not consistent for flows with different capillary numbers (Nca). When compared with relative air permeability, relative water permeability has a higher scatter. It was further observed that the dynamic effects on the relative permeability curve are more apparent for networks with larger pore sizes than that with smaller pore sizes. In addition, the effect of pore size on relative water permeability is higher than that on relative air permeability.