A novel approach to clustering for image segmentation and a new object-based image retrieval method are proposed. The clustering is achieved using the Fisher discriminant as an objective function. The objective function is improved by adding a spatial constraint that encourages neighboring pixels to take on the same class label. A six-dimensional feature vector is used for clustering by way of the combination of color and busyness features for each pixel. After clustering, the dominant segments in each class are chosen based on area and used to extract features for image retrieval. The color content is represented using a histogram, and Haar wavelets are used to represent the texture feature of each segment. The image retrieval is segment-based; the user can select a query segment to perform the retrieval and assign weights to the image features. The distance between two images is calculated using the distance between features of the constituent segments. Each image is ranked based on this distance with respect to the query image segment. The algorithm is applied to a pilot database of natural images and is shown to improve upon the conventional classification and retrieval methods. The proposed segmentation leads to a higher number of relevant images retrieved, 83.5% on average compared to 72.8 and 68.7% for the k-means clustering and the global retrieval methods, respectively.