Integrated cell formation and layout (CFLP) is an extended application of the group technology philosophy in which machine cells and cell layout are addressed simultaneously. The aim of this technological innovation is to improve both productivity and flexibility in modern manufacturing industry. However, due to its combinatorial complexity, the cell formation and layout problem is best solved by heuristic and metaheuristic approaches. As CFLP is prevalent in manufacturing industry, developing robust and efficient solution methods for the problem is imperative. This study seeks to develop a fuzzy simulated evolution algorithm (FSEA) that integrates fuzzy-set theoretic concepts and the philosophy of constructive perturbation and evolution. Deriving from the classical simulated evolution algorithm, the search efficiency of the major phases of the algorithm is enhanced, including initialization, evaluation, selection and reconstruction. Illustrative computational experiments based on existing problem instances from the literature demonstrate the utility and the strength of the FSEA algorithm developed in this study. It is anticipated in this study that the application of the algorithm can be extended to other complex combinatorial problems in industry.