Traditionally GT problems focus on the grouping aspects and fail to integrate material handling part in facility layout design. It is necessary to consider the flow between machines while forming machine cells and evaluate grouping based on flow and operational load factors. But after forming cells, machines have to be placed inside a layout to minimize the material handling distance. There are not many approaches which consider the actual volume flow between machines while grouping and the related handling distances while placing machine cells. Typical GT based cell formation problems stop after grouping cells and evaluating the quality of the grouped cells. This thesis develops a comprehensive cell formation model, which integrates the GT philosophy with a facility layout problem using From-between flow matrix as a tool. This approach forms machine cells using a Non-Linear Integer Programming (NLIP) optimization model, assigns parts to cells using a new heuristic algorithm, evaluates cell grouping using a novel grouping efficiency measure and places machine cells in a layout space using a GA approach. Known case studies from literature are selected and tested using the developed procedure. Results obtained show a reduction in the intercell flow, high grouping efficiency and minimal material handling costs after machine placement when compared with the existing models.