Recent developments in RNA-sequencing (RNA-seq) technology have led to a rapid increase in gene expression data in the form of counts. RNA-seq can be used for a variety of applications, however, identifying differential expression (DE) remains a key task in functional genomics. There have been a number of statistical methods for DE detection for RNA-seq data. One common feature of several leading methods is the use of the negative binomial (Gamma–Poisson mixture) model. That is, the unobserved gene expression is modeled by a gamma random variable and, given the expression, the sequencing read counts are modeled as Poisson. The distinct feature in various methods is how the variance, or dispersion, in the Gamma distribution is modeled and estimated. We evaluate several large public RNA-seq datasets and find that the estimated dispersion in existing methods does not adequately capture the heterogeneity of biological variance among samples. We present a new empirical Bayes shrinkage estimate of the dispersion parameters and demonstrate improved DE detection.