In this work, we formulate the interaction between image segmentation and object recognition in the framework of the Expectation-Maximization (EM) algorithm. We consider segmentation as the assignment of image observations to object hypotheses and phrase it as the E-step, while the M-step amounts to fitting the object models to the observations. These two tasks are performed iteratively, thereby simultaneously segmenting an image and reconstructing it in terms of objects. We model objects using Active Appearance Models (AAMs) as they capture both shape and appearance variation. During the E-step, the fidelity of the AAM predictions to the image is used to decide about assigning observations to the object. For this, we propose two top-down segmentation algorithms. The first starts with an oversegmentation of the image and then softly assigns image segments to objects, as in the common setting of EM. The second uses curve evolution to minimize a criterion derived from the variational interpretation of EM and introduces AAMs as shape priors. For the M-step, we derive AAM fitting equations that accommodate segmentation information, thereby allowing for the automated treatment of occlusions. Apart from top-down segmentation results, we provide systematic experiments on object detection that validate the merits of our joint segmentation and recognition approach.