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In this paper, we propose a PDE-based level set method. Traditionally, interfaces are represented by the zero level set of continuous level set functions. Instead, we let the interfaces be represented by discontinuities of piecewise constant level set functions. Each level set function can at convergence only take two values, i.e., it can only be 1 or -1; thus, our method is related to phase-field methods. Some of the properties of standard level set methods are preserved in the proposed method, while others are not. Using this new method for interface problems, we need to minimize a smooth convex functional under a quadratic constraint. The level set functions are discontinuous at convergence, but the minimization functional is smooth. We show numerical results using the method for segmentation of digital images.