This paper presents an ant colony optimization methodology for optimally clustering N objects into K clusters. The algorithm employs distributed agents which mimic the way real ants find a shortest path from their nest to food source and back. This algorithm has been implemented and tested on several simulated and real datasets. The performance of this algorithm is compared with other popular stochastic/heuristic methods viz. genetic algorithm, simulated annealing and tabu search. Our computational simulations reveal very encouraging results in terms of the quality of solution found, the average number of function evaluations and the processing time required. © 2003 Elsevier B.V. All rights reserved.