In this paper, we propose a model-based, competitive learning procedure for the clustering of variable-length sequences. Hidden Markov models (HMMs) are used as representations for the cluster centers, and rival penalized competitive learning (RPCL), originally developed for domains with static, fixed-dimensional features, are extended. State merging operations are also incorporated to favor the discovery of smaller HMMs. Simulation results show that our extended version of RPCL can produce a more accurate cluster structure than k-means clustering.