This paper proposes a dynamic hidden Markov random field (DHMRF) model for foreground object and moving shadow segmentation in indoor video scenes. Given an image sequence, temporal dependencies of consecutive segmentation fields and spatial dependencies within each segmentation field are unified in the novel dynamic probabilistic model that combines the hidden Markov model (HMM) and the Markov random field (MRF). An efficient approximate filtering algorithm is derived for the DHMRF model to recursively estimate the segmentation field from the history of observed images. The foreground and shadow segmentation method integrates both intensity and edge information. Moreover, models of background, shadow, and edge information are updated adaptively for nonstationary background processes. Experimental results show that the proposed approach can accurately detect moving objects and their cast shadows even in monocular grayscale video sequences.