In this paper, a nonlinear boundary element method (BEM) is developed for investigating air cavity formation during the high-speed water entry of wedges. A technique is proposed for dynamic re-gridding of free surface boundaries. This technique applies to both equally and nonequally spaced grids, and it is able to suppress the numerical instabilities encountered using a BEM for simulating free surface flows. The authors also develop a purely numerical method to simulate nonviscous flow separation, which occurs when the flow reaches the knuckle of the wedge. The present nonlinear BEM has been verified by comparisons with similarity solutions. We also compare numerical results with experimental results. Finally, we give a numerical prediction of the evolution of the cavity until the closure of the cavity, and the influence of the initial entry velocity, wedge mass, and deadrise angle on the characteristics of the transient cavities is investigated.