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Matching pursuits is a well known technique for signal representation and has also been used as a feature extractor for some classification systems. However, applications that use matching pursuits (MP) algorithm in their feature extraction stage are quite problem domain specific, making their adaptation for other types of problems quite hard. In this paper we propose a matching pursuits based similarity measure that uses only the dictionary, coefficients and residual information provided by the MP algorithm while comparing two signals. Hence it is easily applicable to a variety of problems. We show that using the MP based similarity measure for competitive agglomerative fuzzy clustering leads to an interesting and novel update equation that combines the standard fuzzy prototype updating equation with a term involving the error between approximated signals and approximated prototypes. The potential value of the similarity measure is investigated using the fuzzy k-nearest prototype algorithm of Frigui for a two-class, signal classification problem. It is shown that the new similarity measure significantly outperforms the Euclidean distance.