The aim of this work is to explore a new method for producing spun yarn on a modified ring spinning system which is called “clusterspun yarn”. Here, we describe the effects of the clustering of polyester multifilaments on the internal structure and properties of a composite yarn. Cotton fibers and polyester multifilaments were spun into 19 Ne cluster and core-spun yarns at five different twist levels. These yarns were then tested to compare their properties, including tenacity, elongation, and evenness. Surface morphology and structural variations of cluster and core-spun yarns were studied by scanning electron microscopy. Microtome and image-processing methods have been used to study the structure and packing of fibers in the cross-section of yarns. The results show that the special structure of a cluster-spun yarn results in pronounced enhancement in the structural mechanics and yarn properties. The statistical analysis results indicate that the tenacity and breaking elongation of cluster- spun yarn is significantly more than that in core-spun yarn. The results show that the twist factor at about 3.9(α e ) gives the optimum properties. In addition, lower twist is needed to produce quality yarn in cluster-spun yarns as compared with normal core-spun yarns.