The dynamic cellular facility layout problem (DCFLP) is a well-known NP-hard problem. It has been estimated that the efficient design of DCFLP reduces the manufacturing cost of products by maintaining the minimum material flow among all machines in all cells, as the material flow contributes around 10–30% of the total product cost. However, being NP hard, solving the DCFLP optimally is very difficult in reasonable time. Therefore, this article proposes a novel similarity score-based two-phase heuristic approach to solve the DCFLP optimally considering multiple products in multiple times to be manufactured in the manufacturing layout. In the first phase of the proposed heuristic, a machine–cell cluster is created based on similarity scores between machines. This is provided as an input to the second phase to minimize inter/intracell material handling costs and rearrangement costs over the entire planning period. The solution methodology of the proposed approach is demonstrated. To show the efficiency of the two-phase heuristic approach, 21 instances are generated and solved using the optimization software package LINGO. The results show that the proposed approach can optimally solve the DCFLP in reasonable time.