This paper deals with the development of variable-node element and its application to the adaptive h-version mesh refinement-recovery for the incompressible viscous flow analysis. The element which has variable mid-side nodes can be used in generating the transition zone between the refined and unrefined element and efficiently used for the construction of a refined mesh without generating distorted elements. A modified Guassian quadrature is needed to evaluate the element matrices due to the discontinuity of derivatives of the shape functions used for the element. The penalty function method which can reduce the number of the independent variables is adopted for the purpose of computational efficiency and the selective reduced integration is carried out for the convection and pressure terms to preserve the stability of solution. For the economical analysis of transient problems in which the locations to be refined are changed in accordance with the dynamic distribution of velocity gradient, 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 wind around the structures can be obtained automatically by the proposed scheme.