Often groups of genes in regulatory networks, also called modules, work collaboratively on similar functions. Mathematically, the modules in a regulatory network has often been thought as a group of genes that interact with each other significantly more than the rest of the network. Finding such modules is one of the fundamental problems in understanding gene regulation. In this paper, we develop a new approach to identify modules of genes with similar functions in biological regulatory networks (BRNs). Unlike existing methods, our method recognizes that there are different types of interactions (activation, inhibition), these interactions have directions and they take place only if the activity levels of the activating (or inhibiting) genes are above certain thresholds. Furthermore, it also considers that as a result of these interactions, the activity levels of the genes change over time even in the absence of external perturbations. Here we addresses both the dynamic behavior of gene activity levels and the different interaction types by an incremental algorithm that is scalable to the organism wide BRNs with many dynamic steps. Our experimental results suggest that our method can identify biologically meaningful modules that are missed by traditional approaches.