An adaptive wavelet-based method provides an alternative means to refine grids according to local demands of the physical solution. One of the prominent challenges of such a method is the application to problems defined on complex domains. In the case of incompressible flow, the application to problems with complicated domains is made possible by the use of the Navier-Stokes–Brinkman equations. These equations take into account solid obstacles by adding a penalized velocity term in the momentum equation. In this study, an adaptive wavelet collocation method, based on interpolating wavelets, is first applied to a benchmark problem defined on a simple domain to demonstrate the accuracy and efficiency of the method. Then the penalty technique is used to simulate flows over obstacles. The numerical results are compared to those obtained by other computational approaches as well as to experiments.