We present an improved method for computing incompressible viscous flow around suspended rigid particles using a fixed and uniform computational grid. The main idea is to incorporate Peskin's regularized delta function approach [Acta Numerica 11 (2002) 1] into a direct formulation of the fluid-solid interaction force in order to allow for a smooth transfer between Eulerian and Lagrangian representations while at the same time avoiding strong restrictions of the time step. This technique was implemented in a finite-difference and fractional-step context. A variety of two- and three-dimensional simulations are presented, ranging from the flow around a single cylinder to the sedimentation of 1000 spherical particles. The accuracy and efficiency of the current method are clearly demonstrated.