A wireless sensor network consists of spatially distributed autonomous sensors to cooperatively monitor physical or environmental conditions, such as temperature, sound, vibration, pressure, motion or pollutants. Different approaches have used for simulation and modeling of SN (Sensor Network) and WSN. Traditional approaches consist of various simulation tools based on different languages such as C, C++ and Java. In this paper, MATLAB (7.6) Simulink was used to build a complete WSN system. Simulation procedure includes building the hardware architecture of the transmitting nodes, modeling both the communication channel and the receiving master node architecture. Bluetooth was chosen to undertake the physical layer communication with respect to different channel parameters (i.e., Signal to Noise ratio, Attenuation and Interference). The simulation model was examined using different topologies under various conditions and numerous results were collected. This new simulation methodology proves the ability of the Simulink MATLAB to be a useful and flexible approach to study the effect of different physical layer parameters on the performance of wireless sensor networks.