Image segmentation is a branch of digital image processing which emphases on splitting an image into different fragments according to their features. This work proposes a novel image segmentation technique using fast non local (N-L) means filter with region merging approach. Here, a random noise is added to the original image and discrete wavelet transform (DWT) is applied to separate the low and high frequency bands of the digital image. The low frequency component is subjected to a fast N-L means filter and the filtered image is segmented by graph-based segmentation technique. Here, these segmented image regions are merged to reduce the over segmentation patterns. The detailed coefficients of the image component are treated with soft threshold filter to reduce the residual noise. Finally merged image is combined with preserved edge features at wavelet projection resulting in better segmented image. The results are compared with some of the best methods available in literature and are found to be significantly better. Keywords: Discrete wavelet transform (DWT), fast NL-means filter, graph-based segmentation, boundary based hierarchical region merging, soft-thresholding, peak signal to noise ratio (PSNR).