A method for producing a noise-reduced digital image captured using a digital imaging system having signal-dependent noise characteristics, comprising: capturing one or more noisy digital images of a scene, wherein said at least one noisy digital image has signal-dependent noise characteristics; defining a functional relationship to relate the noisy digital images to a noise-reduced digital image, wherein the functional relationship includes at least two sets of unknown parameters, and wherein at least one of the sets of unknown parameters relates to the signal-dependent noise characteristics; defining an energy function responsive to the functional relationship which includes at least a data fidelity term to enforce similarities between the noisy digital images and the noise-reduced digital image, and a spatial fidelity term to encourage sharp edges in the noise-reduced digital image; and using an optimization process to determine a noise-reduced image responsive to the energy function.