We study thegrouping by swapping problem, which occurs in memory compaction and in computing the exponential of a matrix. In this problem we are given a sequence ofn numbers drawn from {0,1, 2,...,m−1} with repetitions allowed; we are to rearrange them, using as few swaps of adjacent elements as possible, into an order such that all the like numbers are grouped together. It is known that this problem is NP-hard. We present a probabilistic analysis of a grouping algorithm calledMEDIAN that works by sorting the numbers in the sequence according to their median positions. Our results show that the expected behavior ofMEDIAN is within 10% of optimal and is asymptotically optimal asn/m→∞ or asn/m→0.