A cell formation approach based on cluster analysis is developed for the configuration of manufacturing cells. Cell formation, which is to group machines and parts into machine cells and the associated part families, is implemented to add the flexibility and efficiency to manufacturing systems. In order to develop an efficient clustering procedure, this paper proposes a cluster analysis-based approach developed by incorporating and modifying two cluster analysis methods, a hierarchical clustering and a non-hierarchical clustering method. The objective of the proposed approach is to minimize intercellular movements and maximize the machine utilization within clusters. The proposed approach is tested on the cell formation problems and is compared with other well-known methodologies available in the literature. The result shows that the proposed approach is efficient enough to yield a good quality solution no matter what the difficulty of data sets is, ill or well-structured.