We present a thermodynamically consistent level sets approach based on regularization energy functional which can be directly incorporated into a Galerkin finite element framework to model interface motion. The regularization energy leads to a diffusive form of flux that is embedded within the level sets evolution equation which maintains the signed distance property of the level set function. The scheme is shown to compare well with the velocity extension method in capturing the interface position. The proposed level sets approach is employed to study the α-γ phase transformation in RDX single crystal shocked along the (100) plane. Example problems in one and three dimensions are presented. We observe smooth evolution of the phase interface along the shock direction in both models. There is no diffusion of the interface during the zero level set evolution in the three dimensional model. The level sets approach is shown to capture the characteristics of the shock-induced α-γ phase transformation such as stress relaxation behind the phase interface and the finite time required for the phase transformation to complete. The regularization energy based level sets approach is efficient, robust, and easy to implement.