In this paper, we present an improved multi-scale gradient algorithm. The proposed algorithm works the effectively handling of both step and blurred edges. In the proposed algorithm, the image sharpening operator is sharpening the edges and contours of the objects. This operation gives an opportunity to get noise reduced image and step edged image. After that, multi-scale gradient operator works on noise reduced image in order to get a gradient image. The gradient image is segmented by watershed transform. The approach of region merging is used after watershed transform. The region merging is carried out according to the region area and region homogeneity. The region number of the proposed algorithm is 36% shorter than that of the existing algorithm because the proposed algorithm produces a few irrelevant regions. Moreover, the computational time of the proposed algorithm is relatively fast in comparison with the existing one.