This paper presents a novel unsupervised iterative blood vessel segmentation algorithm using fundus images. First, a vessel enhanced image is generated by tophat reconstruction of the negative green plane image. An initial estimate of the segmented vasculature is extracted by global thresholding the vessel enhanced image. Next, new vessel pixels are identified iteratively by adaptive thresholding of the residual image generated by masking out the existing segmented vessel estimate from the vessel enhanced image. The new vessel pixels are then region grown into the existing vessel, thereby resulting in an iterative enhancement of the segmented vessel structure. As the iterations progress, the number of false edge pixels identified as new vessel pixels increases compared to the number of actual vessel pixels. A key contribution of this paper is a novel stopping criterion that terminates the iterative process leading to higher vessel segmentation accuracy. This iterative algorithm is robust to the rate of new vessel pixel addition since it achieves 93.2%- 95.35% vessel segmentation accuracy with 0.9577-0.9638 area under ROC curve (AUC) on abnormal retinal images from the STARE data set. The proposed algorithm is computationally efficient and consistent in vessel segmentation performance for retinal images with variations due to pathology, uneven illumination, pigmentation and fields of view since it achieves a vessel segmentation accuracy of about 95% in an average time of 2.45 seconds, 3.95 seconds and 8 seconds on images from three public data sets DRIVE, STARE, and CHASE DB1, respectively. Additionally, the proposed algorithm has more than 90% segmentation accuracy for segmenting peripapillary blood vessels in the images from the DRIVE and CHASE DB1 data sets.