In distributed peer-to-peer systems, huge amount of data are dispersed. Grouping of those data from multiple sources is a tedious task. By applying effective data mining techniques the clustering of distributed data is become ease and this decreases the hurdles of clustering due to processing, storage, and transmission costs. To perform a dynamic distributed clustering, a fully decentralized clustering method has been proposed. HGD Cluster can cluster a data set which is dispersed among a large number of nodes in a distributed environment using hierarchal and grid based clustering techniques. When nodes are fully asynchronous and decentralized and also adaptable to stir, then HGD cluster will apply. The general design principles employed in the proposed algorithm also allow customization for other classes of clustering. It is fully capable of clustering dynamic and distributed data sets. Using the algorithm, every node can maintain summarized views of the dataset. Customizing HGD Cluster for execution of the hierarchal-based and grid-based clustering methods on the summarized views is the main aim of the proposed system. Coping with dynamic data is made possible by gradually adapting the clustering model.