The study of Mobile Ad-hoc Network remains attractive due to the desire to achieve better performance and scalability. MANETs are distributed systems consisting of mobile hosts that are connected by multi-hop wireless links. Such systems are self organized and facilitate communication in the network without any centralized administration. MANETs exhibit battery power constraint and suffer scalability issues therefore cluster formation is expensive. This is due to the large number of messages passed during the process of cluster formation. Clustering has evolved as an imperative research domain that enhances system performance such as throughput and delay in Mobile Ad hoc Networks (MANETs) in the presence of both mobility and a large number of mobile terminals.In this thesis, we present a clustering scheme that minimizes message overhead and congestion for cluster formation and maintenance. The algorithm is devised to be independent of the MANET Routing algorithm. Depending upon the context, the clustering algorithm may be implemented in the routing or in higher layers. The dynamic formation of clusters helps reduce data packet overhead, node complexity and power consumption, The simulation has been performed in ns-2. The simulation shows that the number of clusters formed is in proportion with the number of nodes in MANET.