Quantitative phase imaging (QPI) aims at studying weakly scattering and absorbing biological specimens with subwavelength accuracy without any external staining mechanisms. Use of a reference beam at an angle is one of the necessary criteria for recording of high resolution holograms in most of the interferometric methods used for quantitative phase imaging. The spatial separation of the dc and twin images is decided by the reference beam angle and Fourier-filtered reconstructed image will have a very poor resolution if hologram is recorded below a minimum reference angle condition. However, it is always inconvenient to have a large reference beam angle while performing high resolution microscopy of live cells and biological specimens with nanometric features. In this paper, we treat reconstruction of digital holographic microscopy images as a constrained optimization problem with smoothness constraint in order to recover only complex object field in hologram plane even with overlapping dc and twin image terms. We solve this optimization problem by gradient descent approach iteratively and the smoothness constraint is implemented by spatial averaging with appropriate size. This approach will give excellent high resolution image recovery compared to Fourier filtering while keeping a very small reference angle. We demonstrate this approach on digital holographic microscopy of live cells by recovering the quantitative phase of live cells from a hologram recorded with nearly zero reference angle. © 2016 SPIE.