Many image display devices allow only a limited number of colors to be simultaneously displayed. in disphaying of natural color image using color palette, it is necessary to construct an optimal color palette and the optimal mapping of each pixed of the original image to a color from the palette. In this paper, we proposed the clustering algorithm using local region block centered one color cluster in the prequantized 3-D histogram. Cluster pairs which have the least distortion error are merged by considering distortion measure. The clustering process is continued until to obtain the desired number of colors. The same as the clustering process, original color value. The proposed algorithm incroporated with a spatial activity weighting value which is reflected sensitivity of HVS quantization errors in smoothing region. This method produces high quality display images and considerably reduces computation time.