Many biochemical processes at the sub-cellular level involve a small number of molecules. The local numbers of these molecules vary in space and time, and exhibit random fluctuations that can only be captured with stochastic simulations. We present a novel stochastic operator-splitting algorithm to model such reaction-diffusion phenomena. The reaction and diffusion steps employ stochastic simulation algorithms and Brownian dynamics, respectively. Through theoretical analysis, we have developed an algorithm to identify if the system is reaction-controlled, diffusion-controlled or is in an intermediate regime. The time-step size is chosen accordingly at each step of the simulation. We have used three examples to demonstrate the accuracy and robustness of the proposed algorithm. The first example deals with diffusion of two chemical species undergoing an irreversible bimolecular reaction. It is used to validate our algorithm by comparing its results with the solution obtained from a corresponding deterministic partial differential equation at low and high number of molecules. In this example, we also compare the results from our method to those obtained using a Gillespie multi-particle (GMP) method. The second example, which models simplified RNA synthesis, is used to study the performance of our algorithm in reaction- and diffusion-controlled regimes and to investigate the effects of local inhomogeneity. The third example models reaction-diffusion of CheY molecules through the cytoplasm of Escherichia coli during chemotaxis. It is used to compare the algorithm’s performance against the GMP method. Our analysis demonstrates that the proposed algorithm enables accurate simulation of the kinetics of complex and spatially heterogeneous systems. It is also computationally more efficient than commonly used alternatives, such as the GMP method.