There has been enormous growth in the amount of commercial and scientific data, such as retail transactions, protein sequences, and web-logs. Such datasets consist of sequence data that have an inherent sequential nature. However, few clustering algorithms consider sequentiality. In this paper, we study how to cluster sequence datasets. We propose a new similarity measure to compute the similarity between two sequences. We also present an efficient method for determining the similarity measure and develop a clustering algorithm. Due to the high computational complexity of hierarchical clustering algorithms for clustering large datasets, a new clustering method is required. Therefore, we propose a new scalable clustering method using sampling and a k-nearest-neighbor method. Using a real dataset and a synthetic dataset, we show that the quality of clusters generated by our proposed approach is better than that of clusters produced by traditional algorithms.