A volume penalization approach to simulate magnetohydrodynamic (MHD) flows in confined domains is presented. Here the incompressible visco-resistive MHD equations are solved using parallel pseudo-spectral solvers in Cartesian geometries. The volume penalization technique is an immersed boundary method which is characterized by a high flexibility for the geometry of the considered flow. In the present case, it allows to use other than periodic boundary conditions in a Fourier pseudo-spectral approach. The numerical method is validated and its convergence is assessed for two- and three-dimensional hydrodynamic (HD) and MHD flows, by comparing the numerical results with results from literature and analytical solutions. The test cases considered are two-dimensional Taylor-Couette flow, the $z$-pinch configuration, three dimensional Orszag-Tang flow, ohmic-decay in a periodic cylinder, three-dimensional Taylor-Couette flow with and without axial magnetic field and three-dimensional Hartmann-instabilities in a cylinder with an imposed helical magnetic field.