In functional connectivity analysis, networks of interest are defined based on correlation with the mean time course of a user-selected ’seed’ region. In this work we propose to simultaneously estimate the optimal representative time courses that summarize the fMRI data well and the partition of the volume into a set of disjoint regions that are best explained by these representative time courses. Our approach offers two advantages. First, is removes the sensitivity of the analysis to the details of the seed selection. Second, it substantially simplifies group analysis by eliminating the need for a subject-specific threshold at which correlation values are deemed significant. This unsupervised technique generalizes connectivity analysis to situations where candidate seeds are difficult to identify reliably or are unknown. Our experimental results indicate that the functional segmentation provides a robust, anatomically meaningful and consistent model for functional connectivity in fMRI.