Multi-atlas label fusion is a powerful image segmentation strategy that is becoming increasingly popular in medical imaging. A standard label fusion algorithm relies on independently computed pairwise registrations between individual atlases and the (target) image to be segmented. These registrations are then used to propagate the atlas labels to the target space and fuse them into a single final segmentation. Such label fusion schemes commonly rely on the similarity between intensity values of the atlases and target scan, which is often problematic in medical imaging - in particular, when the atlases and target images are obtained via different sensor types or imaging protocols. In this paper, we present a generative probabilistic model that yields an algorithm for solving the atlas-to-target registrations and label fusion steps simultaneously. The proposed model does not directly rely on the similarity of image intensities. Instead, it exploits the consistency of voxel intensities within the target scan to drive the registration and label fusion, hence the atlases and target image can be of different modalities. Furthermore, the framework models the joint warp of all the atlases, introducing interdependence between the registrations. We use variational expectation maximization and the Demons registration framework in order to efficiently identify the most probable segmentation and registrations. We use two sets of experiments to illustrate the approach, where proton density (PD) MRI atlases are used to segment T1-weighted brain scans and vice versa. Our results clearly demonstrate the accuracy gain due to exploiting within-target intensity consistency and integrating registration into label fusion.