We present a Lagrangian formulation for finite element analysis of quasi-incompressible fluids that has excellent mass preservation features. The success of the formulation lays on a new residual-based stabilized expression of the mass balance equation obtained using the Finite Calculus (FIC) method. The governing equations are discretized with the FEM using simplicial elements with equal linear interpolation for the velocities and the pressure. The merits of the formulation in terms of reduced mass loss and overall accuracy are verified in the solution of 2D and 3D quasi-incompressible free-surface flow problems using the Particle Finite Element Method (PFEM, www.cimne.com/pfem). Examples include the sloshing of water in a tank, the collapse of one and two water columns in rectangular and prismatic tanks and the falling of a water sphere into a cylindrical tank containing water. Copyright c 0000 John Wiley & Sons, Ltd.