For a Poisson problem with a solution having large gradients in (nearly) circular subregions a local defect correction method is considered. The problem on the global domain is discretized on a cartesian grid, whereas the restriction of the problem to a circular subdomain is discretized on a polar grid. The two discretizations are then combined in an iterative way. We show that LDC can be viewed as an iterative method for the Poisson equation on a single composite cartesian‐polar grid. The efficiency of methods is illustrated by numerical examples. © 2002 Wiley Periodicals, Inc. Numer Methods Partial Differential Eq 18: 454–468, 2002; Published online in Wiley InterScience (www.interscience.wiley.com). DOI 10.1002/num.10018