In this paper, we consider a dynamic time division duplex system based on a cloud radio access network (RAN) to support the ultimate goal of efficient resource utilization. To optimize the performance of both remote radio heads (RRHs) and user equipments (UEs) which have multiple antennas, we propose an iterative scheme consisting of four types of beamforming, namely downlink (DL) transmit beamforming, DL receive beamforming, uplink (UL) transmit beamforming, and UL receive beamforming, in an attempt to minimize mean squared error (MSE). The proposed beamforming scheme makes it possible to allow DL and UL transmission be supported simultaneously by managing interference between RRHs and UEs. Our simulation results show that the MSE and the bit error rate (BER) are greatly improved under the proposed beamforming algorithm compared to conventional schemes. From intensive system level simulations, the proposed algorithm points out more than 3 dB performance improvement in terms of the required signal-to-noise-ratio (SNR) to achieve the BER less than 10(-3) compared to conventional schemes.