A method is developed for computingan exact nonorthogonal analysis of variance using cell means. This is accomplished without forming or using computer storage for XO. or XbXo, or an orthogonal transformation of XO, where XO is the N X p nonorthogonal design matrix. The method is a convergent iterative method which utilizes balanced analysis-ofvariance estimates and residuals iteratively in solving the relevant normal equations and conducting tests of hypotheses. A monotonicity property of the method is derived to minimize iteration for nonsignificant factors or interactions in hypothesis testing.