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In Computer Aided Diagnosis (CAD) systems of breast cancer, extraction of the breast region and delineation of the breast contour with the pectoral muscle being removed is an essential preprocessing step. Primarily it allows the search for abnormalities to be limited to the region of the breast without undue effect from the background of the mammogram. This paper presents a new method for the identification and removal of the pectoral muscle in medio-Iateral oblique (MLO) view of mammogram using iterative thresholding. Our algorithm also identifies the presence of abnormal axillary lymph nodes, which is a major sign of breast carcinoma, and detects the breast border.