Motivation: Identifying groups of co-regulated genes by monitoring their expression over various experimental conditions is complicated by the fact that such co-regulation is condition-specific. Ignoring the context-specific nature of co-regulation significantly reduces the ability of clustering procedures to detect co-expressed genes due to additional ‘noise’ introduced by non-informative measurements. Results: We have developed a novel Bayesian hierarchical model and corresponding computational algorithms for clustering gene expression profiles across diverse experimental conditions and studies that accounts for context-specificity of gene expression patterns. The model is based on the Bayesian infinite mixtures framework and does not require a priori specification of the number of clusters. We demonstrate that explicit modeling of context-specificity results in increased accuracy of the cluster analysis by examining the specificity and sensitivity of clusters in microarray data. We also demonstrate that probabilities of co-expression derived from the posterior distribution of clusterings are valid estimates of statistical significance of created clusters.