The computational cost of a collision detection (CD) algorithm on polygonal surfaces depends highly on the complexity of the models. A novel "locally refined" approach is introduced in this paper for fast CD in haptic rendering applications, e.g. haptic surgery and haptic sculpture simulations. Exact interference detections are performed on proposed locally refined meshes, which are in multi-resolution representation. The meshes are generated using mesh simplification and space partition. A new BVH algorithm called "Active Bounding Tree", or AB-Tree, handling collision queries is introduced. At runtime the meshes are dynamically refined to higher resolution in areas that are most likely to collide with other objects. The algorithms are successfully demonstrated in an interactive haptic environment. Compared to existing CD algorithms on single resolution models, noticeable performance improvement has been observed in terms of the precision of collision queries, frame rate, and memory usage.