The design of cellular manufacturing systems (CMS) mainly involves three interrelated phases: cell formation, intracell layout (machine layout), and intercell layout (cell layout). Most of the techniques for the design of CMS considered only the cell formation phase and only a few researchers for the design of CMS involved three interrelated phases separately and sequentially without evaluating the effect of each phase on the other phases. This sequential approach may be efficient to one particular phase but need not be efficient for the overall design of CMS. In this paper, we propose a mathematical model for integration of three interrelated phases and an intelligent hybrid algorithm that uses simulated annealing and genetic algorithms to solve the problem. The proposed model is validated using examples from literature. Copyright © 2011 Inderscience Enterprises Ltd.