We present a new ab initio method that uses similarity renormalization group (SRG) techniques to continuously diagonalize nuclear many-body Hamiltonians. In contrast with applications of the SRG to two- and three-nucleon interactions in free space, we perform the SRG evolution "in medium" directly in the A-body system of interest. The in-medium approach has the advantage that one can approximately evolve 3,…,A-body operators using only two-body machinery based on normal-ordering techniques. The method is nonperturbative and can be tailored to problems ranging from the diagonalization of closed-shell nuclei to the construction of effective valence-shell Hamiltonians and operators. We present first results for the energies of 4He, 16O, and 40Ca, which have accuracies comparable to coupled-cluster calculations.