Video image processing based vehicle tracking and traffic monitoring provides several advantages over traditional approaches. One of the challenges lies in the robust segmentation and region tracking. The traditional approaches have assumed 1) the region of the object of interest is uniform and homogeneous; 2) adjacent regions should differ significantly. These are often not true for a vehicle object. In this paper, we propose a dynamic content based image segmentation method for vehicle tracking and traffic monitoring. Only initial lane information is needed for camera calibration. The system will automatically detect the direction of the traffic flow for vehicle detection and traffic monitoring. The preliminary experimental results show that this method is effective.