A method is provided that includes performing a free placement of a system design comprising a plurality of power domains, wherein the power domains are not constrained to physical regions, assigning a physical region to each of the power domains based on the free placement of cells in the power domains, performing a soft cluster placement of the system design with each power domain and corresponding physical region defined as a soft cluster, refining at least one physical region based on the soft cluster placement, redefining cells in at least one power domain based on the soft cluster placement of the cells and the corresponding physical region, and performing a hard cluster placement of the system design with each power domain and corresponding physical region defined as a hard cluster to generate final power domains.