This paper presents a cost effective hardware-in-the-loop (HIL) environment integrated into a Simulink real-time simulation. Using an inexpensive national instruments data acquisition card in conjunction with Simulink real-time simulator, a Schweitzer engineering laboratory (SEL) relay was integrated into a Simulink power system fault transient simulation. The sequence of events, from the fault initialization to the breaker opening, was captured through the Simulink model. During the simulation, the relay was fed generator terminal voltages and currents from the Simulink simulation. When the relay detects a fault condition, it sends an open breaker signal back to the simulation. The simulation opens the virtual breaker until the fault is cleared and the open-breaker signal from the relay ceases.