The performance of BeiDou Navigation Satellite System (BDS) B2a signal acquisition and tracking is affected when co-existing with the Distance Measuring Equipment (DME) pulse signals in the same frequency band. To mitigate the detrimental impacts of DME interference on the B2a receiver, an adaptive hybrid blanking algorithm is proposed which contains time-domain interference detection and frequency-domain interference suppression modules. With flexible configurations, the proposed algorithm is capable of optimizing the interference mitigation according to the strength of the detected DME signals indicated by Jammer-to-noise ratio (J/N). A laboratory testbed is first built to collect simulated B2a data contaminated by DME interference. An empirical model is established to relate J/N with 𝑘𝛼, which is the key parameter of the notch filter that affects the performance of the proposed algorithm. To verify the performance of the proposed algorithm, outdoor experiments are conducted near 2 DME stations close to the Beijing Capital International Airport. The carrier-to-noise density ratio (C/N0) and code tracking errors are analyzed with different mitigation methods applied, including pulse blanking, notch filter and hybrid blanking. Results show that the proposed adaptive hybrid blanking algorithm can achieve the maximum C/N0 and minimum code tracking error. In particular, when applying the proposed algorithm, the mean C/N0 is improved by up to 3.32 dB compared with that when no mitigation method is applied. This study contributes to the development of novel DME interference mitigation approaches to improve the robustness of airborne GNSS receivers.