The group formation problem of the machine and part in Flexible Manufacturing System (FMS) is a very important issue in planning stage of FMS. This paper discusses the problem of machine-part group formation. The purpose of the study is to develop a heuristic algorithm, which can handle more realistic machine-part group formation problem by considering manufacturing factors. A new similarity coeffecient has been developed to solve more realistic machine-part group formation problem. For the purpose of illustations, a numerical example is presented.