A method for free-breathing magnetic resonance imaging (MRI) using iterative image-based respiratory motion correction is provided. An MRI system is used to acquired k-space data and navigator data from a subject. The k-space data is then sorted into a plurality of data bins using the navigator data. A motion correction parameter is estimated for each data bin and is applied to the respective k-space data in that bin. The corrected k-space data segments are then combined to form a corrected k-space data set, from which an image is reconstructed. The process may be iteratively repeated until an image quality metric is optimized; for example, until an image sharpness measure is sufficiently maximized.