This paper deals with the development of a variable-node element and its application to the adaptive h-version mesh refinement-recovery for incompressible viscous flow analysis. The element which has variable mid-side nodes and forms the transition zone between the refined and unrefined zones is efficiently used for constructing a refined mesh without generating distorted elements. A modified Gaussian quadrature is needed to evaluate the element matrix due to the discontinuity of derivatives of the shape functions used for the element. The penalty function method which can reduce the number of independent variables is adopted for the purpose of computational efficiency and selective reduced integration is carried out for the convection and pressure terms to preserve the stability of the solution. For economical analysis of transient problems, not only the mesh refinement but also the mesh recovery is needed. The numerical examples show that the optimal mesh for the finite element analysis of a flow around the structures can be obtained automatically by the proposed scheme. (C) 1999 Elsevier Science Ltd. All rights reserved.