AbstractIn this work we present a numerical method for solving the incompressible Navier–Stokes equations in an environmental fluid mechanics context. The method is designed for the study of environmental flows that are multiscale, incompressible, variable‐density, and within arbitrarily complex and possibly anisotropic domains. The method is new because in this context we couple the embedded‐boundary (or cut‐cell) method for complex geometry with block‐structured adaptive mesh refinement (AMR) while maintaining conservation and second‐order accuracy. The accurate simulation of variable‐density fluids necessitates special care in formulating projection methods. This variable‐density formulation is well known for incompressible flows in unit‐aspect ratio domains, without AMR, and without complex geometry, but here we carefully present a new method that addresses the intersection of these issues. The methodology is based on a second‐order‐accurate projection method with high‐order‐accurate Godunov finite‐differencing, including slope limiting and a stable differencing of the nonlinear convection terms. The finite‐volume AMR discretizations are based on two‐way flux matching at refinement boundaries to obtain a conservative method that is second‐order accurate in solution error. The control volumes are formed by the intersection of the irregular embedded boundary with Cartesian grid cells. Unlike typical discretization methods, these control volumes naturally fit within parallelizable, disjoint‐block data structures, and permit dynamic AMR coarsening and refinement as the simulation progresses. We present two‐ and three‐dimensional numerical examples to illustrate the accuracy of the method. Copyright © 2008 John Wiley & Sons, Ltd.