Automatic retinal image segmentation is desirable for some disease diagnosis such as diabetes. In this paper, we propose a new image segmentation method to segment retinal images. The new method is based on the Mumford-Shah (MS) model. As a region-based approach, the MS model is a good segmentation technique. However, due to non-uniform illumination, some traditional approximations of the MS model cannot deal with this type of problems. We present a new method that requires no approximations. Instead, Gabor wavelet filter is used, and the method can segment objects with complicated image intensity distribution. The method is used to detect blood vessels in retinal images. The results are comparable with or better than state-of-the-art. Our method requires no training and is relatively fast.