In this paper the cell-based smoothed finite element method (CS-FEM) is introduced into two mainstream aspects of computational fluid dynamics: incompressible flows and fluid–structure interaction (FSI). The emphasis is placed on the fluid gradient smoothing which simply requires equal numbers of Gaussian points and smoothing cells in each four-node quadrilateral element. The second-order, smoothed characteristic-based split scheme in conjunction with a pressure stabilization is then presented to settle the incompressible Navier–Stokes equations. As for FSI, CS-FEM is applied to the geometrically nonlinear solid as usual. Following an efficient mesh deformation strategy, block-Gauss–Seidel procedure is adopted to couple all individual fields under the arbitrary Lagriangian–Eulerian description. The proposed solvers are carefully validated against the previously published data for several benchmarks, revealing visible improvements in computed results.