A three-dimensional, Reynolds-averaged, compressible Navier-Stokes analysis (using a multi-block grid with the grid embedded in the tip-clearance space) has been developed to study the tip-clearance flow of an axial compressor rotor. A low-Reynolds number k-ε model have been used to reproduce the effects of turbulence. In order to assess the effect of the tip-clearance-grid treatment on prediction for the tip-clearance flow, calculations using a single-block grid (pinched grid topology) and multi-block grid (embedded grid topology) have been performed to calculate the flow field of NASA Rotor 37. The results are compared with experimental data. It has been found that both the single-block and multi-block approaches give a good agreement with the experimental data regarding the overall performance map of the rotor. For the prediction of the spanwise distributions of averaged aerodynamic properties downstream of the rotor, however, the orderly grid over the blade tip associated with the embedded grid has produced accurate predictions particularly from 40% to 80% span. In order to investigate the tip-clearance flow for different operating conditions, calculations have been performed for conditions at 100% (transonic inflow condition) and 60% (subsonic inflow condition) of the design point speed. Computed limiting streamlines at the blade tip surface and particle traces released from the tip-clearance have been used to study the tip-clearance flow. At the 100% speed, both separation and reattachment lines have been observed and a separation bubble occurs. At the 60% speed, the separation line shifts to the blade pressure side and the reattachment line can be partly observed near the leading edge of the blade tip surface. In order to investigate the interaction of the leakage vortex from the tip clearance with the main flow, the computed secondary flows on the cross-flow sections have been analyzed at the 100% and the 60% speeds. At the 100% speed, the vortex core apparently increases in size, as it moves downstream. At 60% speed, the second vortex, first reported by Suder and Celestina in 1994, is barely observable. Furthermore, the trajectory of vortex core identified using a semi-analytical method has also been used to study the vortex motion in the flow field near the blade tip.