A new unstructured-grid high-order characteristics upwind ®nite-volume algorithm for accurate numerical simulation of incompressible laminar ¯ow and forced convection heat transfer over a composite system containing simultaneously porous-saturated region and ¯uid region is presented in this paper. It is an upwind method at both the dierential equation and discretized equation levels based on the method of characteristics. Flow variables are calculated along characteristics and their initial values are interpolated based on the signs of the corresponding characteristic speed. In addition, an upwind-based interpolation method of thirdorder accuracy is used for interpolating ¯ow variables on an unstructured grid. With these inherent upwind techniques for evaluation of convection ¯uxes at control volume surfaces, no arti®cial viscosity is required. The discretized equations are then solved by an explicit multistage Runge±Kutta time stepping scheme together with a point-implicit treatment of the source terms. Uni®ed governing equations for the ¯uid and porous media regions are employed, and the matching conditions at the ¯uid±porous interface are thus satis®ed automatically. This signi®cantly reduces the complexity of the traditional method, which considers two regions separately. A detailed numerical investigation of ¯uid ¯ow over a backward-facing step with a porous block insert directly behind the step is performed, in order to validate the numerical method, demonstrate the accuracy and robustness of the scheme proposed and explore the use of porous inserts for heat transfer enhancement in recirculating ¯ow.