Hand gesture identification has various human computer interaction (HCI) applications. This paper presents a method for subtle hand gesture identification from sEMG of the forearm by decomposing the signal into components originating from different muscles. The processing requires the decomposition of the surface EMG by temporal decorrelation source separation (TDSEP) based blind source separation technique. Pattern classification of the separated signal is performed in the second step with a back propagation neural network. The focus of this work is to establish a simple, yet robust system that can be used to identify subtle complex hand actions and gestures for control of prosthesis and other HCI based devices. The proposed model based approach is able to overcome the ambiguity problems (order and magnitude problem) of BSS methods by selecting an a priori mixing matrix based on known hand muscle anatomy. The paper reports experimental results, where the system was able to reliably recognize different subtle hand gesture with an overall accuracy of 97%. The advantage of such a system is that it is easy to train by a lay user, and can easily be implemented in real time after the initial training. The paper also highlights the importance of mixing matrix analysis in BSS technique.