A Lagrangian finite element method for the analysis of incompressible Newtonian fluid flows, based on a continuous re‐triangulation of the domain in the spirit of the so‐called Particle Finite Element Method, is here revisited and applied to the analysis of the fluid phase in fluid–structure interaction problems. A new approach for the tracking of the interfaces between fluids and structures is proposed. Special attention is devoted to the mass conservation problem. It is shown that, despite its Lagrangian nature, the proposed combined finite element‐particle method is well suited for large deformation fluid–structure interaction problems with evolving free surfaces and breaking waves. The method is validated against the available analytical and numerical benchmarks. Copyright © 2010 John Wiley & Sons, Ltd.