The concept of adaptive shape parameters (ASP) has been presented for solution of incompressible Navier Strokes equations using mesh-free local Radial Basis Functions (RBF). The aim is to avoid ill-conditioning of coefficient matrices of RBF weights and inaccuracies in RBF interpolation resulting from non-optimized shape of basis functions for the cases where data points (or nodes) are not distributed uniformly throughout the domain. Unlike conventional approaches which assume globally similar values of RBF shape parameters, the presented ASP technique suggests that shape parameter be calculated exclusively for each data point (or node) based on the distribution of data points within its own influence domain. This will ensure interpolation accuracy while still maintaining well-conditioned system of equations for RBF weights. Performance and accuracy of ASP technique has been tested by evaluating derivatives and laplacian of a known function using RBF in Finite difference mode (RBF-FD), with and without the use of adaptivity in shape parameters. Application of adaptive shape parameters (ASP) for solution of incompressible Navier Strokes equations has been presented by solving lid driven cavity flow problem on mesh-free domain using RBF-FD. The results have been compared for fixed and adaptive shape parameters. Improved accuracy has been achieved with the use of ASP in RBF-FD especially at regions where larger gradients of field variables exist.