An alternative discretization method treating rearrangement and breakup channels on equal footing is introduced for wave-packet description of three-body dynamics. The permutational symmetry for three identical particles is incorporated into the evolution equations of the proposed method. The method is tested on a model three-particle problem that exhibits both rearrangement and breakup channels. Sharp-energy S matrix elements over a broad range of energies above the breakup threshold are extracted from a single wave-packet calculation. © 1990 The American Physical Society.