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Traditional decision tree algorithms face the problem of having sharp decision boundaries which are hardly found in any real-life classification problems. A fuzzy supervised learning in Quest (SLIQ) decision tree (FS-DT) algorithm is proposed in this paper. It is aimed at constructing a fuzzy decision boundary instead of a crisp decision boundary. Size of the decision tree constructed is another very important parameter in decision tree algorithms. Large and deeper decision tree results in incomprehensible induction rules. The proposed FS-DT algorithm modifies the SLIQ decision tree algorithm to construct a fuzzy binary decision tree of significantly reduced size. The performance of the FS-DT algorithm is compared with SLIQ using several real-life datasets taken from the UCI Machine Learning Repository. The FS-DT algorithm outperforms its crisp counterpart in terms of classification accuracy. FS-DT also results in more than 70% reduction in size of the decision tree compared to SLIQ.