This paper presents a new method for local obstacle avoidance of indoor mobile robots. The method combines a directional approach called the lane method and a velocity space approach. The lane method divides working area into lanes and then chooses the best lane to follow for efficient and collision-free movement. Then, the heading direction to enter and follow the best lane is decided, and translational and rotational velocity considering physical limitations of a mobile robot are determined. Since this method combines both the directional and velocity space method, it shows collision-free motion as well as smooth motion taking the dynamic of the robot into account.