This work focuses on subgrid-scale (SGS) modeling for finite-difference large-eddy simulations, employing filters in physical space. When a filter in physical space is used, an overlap is allowed between the unresolved and the resolved scales. For such a filter, all the three terms in the classical decomposition of the SGS stress tensor are present: the Leonard and cross-terms, due to the overlap between scales, and the true SGS Reynolds tensor, expressing the pure effect of the small scales. A dynamic subgrid-scale stress model is proposed, for finite-difference large-eddy simulation of incompressible and compressible flows in which the Leonard and cross-parts of the SGS stress tensor are assumed to be proportional to the resolved part (the ‘‘modified Leonard term’’), which is computed explicity. The SGS Reynolds stress is modeled by the eddy-viscosity Smagorinsky model. The two unknown parameters in this model are computed dynamically, as in Germano et al. [Phys. Fluids A 3, 1790 (1991)], but using a least squares technique. The model is tested using direct numerical simulation data for fully developed turbulent incompressible flows in presence of solid boundaries and free surfaces, and for compressible homogeneous turbulence. A ‘‘box filter’’ in physical space is used. Other SGS models are also tested, viz. the dynamic model of Germano et al. (DSM), and its compressible extension by Moin et al. [Phys. Fluids A 3, 2746 (1991)], and the dynamic mixed model in Zang et al. [Phys. Fluids A 5, 3186 (1993)] (DMM) and its compressible version developed here. Results on the behavior of the different models with regard to energy exchanges and correlation with the exact SGS stresses are presented for different filter widths. In particular high correlation is found between the modified Leonard and cross-terms thus justifying the basic assumption made in the model.