In this paper we show how the modularity measure can serve as a useful criterion for co-clustering document-term matrices. We present and investigate the performance of CoClus , a novel, effective block-diagonal co-clustering algorithm which directly maximizes this modularity measure. The maximization is performed using an iterative alternating optimization procedure, in contrast to algorithms that use spectral relaxations of the discrete optimization problems. Extensive comparative experiments performed on various document-term datasets demonstrate that this approach is very effective, stable, and outperforms other block-diagonal co-clustering algorithms devoted to the same task. Another important advantage of using modularity in the co-clustering context is that it provides a novel, simple way of determining the appropriate number of co-clusters. Availability: an implementation of CoClus is available as part of the recently released coclust Python package which is available at: https://pypi.python.org/pypi/coclust [ABSTRACT FROM AUTHOR]