In this study a numerical scheme was proposed to improve the immersed boundary method introduced by Mohd-Yusof (1997). The mass correction was incorporated into the solution algorithm to maintain the incompressible condition which was the most critical part of the immersed boundary method. To represent the arbitrary solid boundary and the complex free surface evolution, both the traditional level set method (Osher and Sethian, 1988) and the hybrid particle level set method (Enright et al., 2002) were applied in the present scheme. Consequently, the desired boundary conditions for both pressure and velocity fields could be imposed simply and accurately on either the solid boundary or the free surface via the advantage of the level set method. A series of numerical experiments were conducted to present the validity and capability of the present numerical scheme, including a uniform flow passing through a cylinder and water waves propagating over a submerged trapezoidal breakwater. The comparisons between present numerical results and experiment data show that very good agreement was achieved for all studied cases.