In this study, a novel overlay architecture for constructing hierarchical and scalable clustering of Peer-to-Peer (P2P) networks is proposed. The proposed architecture attempts to enhance the clustering of peers by incorporating join, split, merge and cluster leader election mechanisms in a fully distributed manner. It takes delay proximity of peers into account as distance measure. By constructing hierarchical clustering of peers, the control message overhead and maintenance such as host departure/host join overhead are decreased. Theoretical comparisons on overheads of the proposed system with that of other systems from literature are studied. The control mechanism for dynamic peer behavior of the architecture is tested over PlanetLab. The performance metrics used are end-to-end delay, diameter, cluster head distance, occupancy rate, peer join latency, accuracy and correctness. The test results are compared with Hierarchical Ring Tree (HRT) and mOverlay architecture. In addition, a P2P video streaming application is run over the proposed network overlay. Streaming tests show that video streaming applications perform well in terms of received video quality if hierarchical clusters considering delay proximity are used as underlying network architecture. (C) 2016 Elsevier B.V. All rights reserved.