In this study, we present a grid refinement model in the lattice Boltzmann method (LBM) for two-dimensional incompressible fluid flow. That is, the model combines the desirable features of the lattice Boltzmann method and stream function-vorticity formulations. In order to obtain an accurate result, very fine grid (or lattice) is required near the solid boundary. Therefore, the grid refinement model is used in the lattice Boltzmann method for stream function-vorticity formulation. This approach is more efficient in that it can obtain the same accurate solution as that in single-block approach even if few lattices are used for computation. In order to validate the grid refinement approach for the stream function-vorticity formulation, the numerical simulations of lid-driven cavity flows were performed and good results were obtained.