This methodology report by the National Center for Education Statistics (NCES) outlines the need and rationale for a two-year postsecondary classification system and the methodology used to produce this classification system. The system was created based on information from the Integrated Postsecondary Education Data System (IPEDS) database that NCES created and maintains. K-means cluster analysis, in addition to several other statistical methods, was used in the process of creating the classification system. A total of seven categories for two-year institutions were created as a result of the analysis across three broad categories. Public institutions (N=1,029) were divides up into three categories: Community Development and Career Institutions, Community Connector Institutions, and Community Mega-Connector Institutions. Private-Not-For-Profit Institutions (N=309) were divided up into two categories, Allied Health Institutions and Connector Institutions. Private For-Profit Institutions (N=730) were divided into the categories of Career Connector and Certificate Institutions. Detailed definitions of each category are also provided. (LD)