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Conventional federated learning (FL) approaches are ineffective in scenarios where clients have significant differences in the distributions of their local data. The Non-IID data distribution in the client data causes a drift in the local model updates from the global optima, which significantly impacts the performance of the trained models. In this article, we present a new algorithm called FLIS that aims to address this problem by grouping clients into clusters that have jointly trainable data distributions. This is achieved by comparing the <italic>inference similarity</italic> of client models. Our proposed framework captures settings where different groups of users may have their own objectives (learning tasks), but by aggregating their data with others in the same cluster (same learning task), superior models can be derived via more efficient and personalized federated learning. We present experimental results to demonstrate the benefits of FLIS over the state-of-the-art approaches on the CIFAR-100/10, SVHN, and FMNIST datasets. Our code is available at <uri>https://github.com/MMorafah/FLIS</uri>.