Clustering and prediction of sets of curves is an important problem in many areas of science and engineering. It is often the case that curves tend to be misaligned from each other in a continuous manner, either in space (across the measurements) or in time. We develop a probabilistic framework that allows for joint clustering and continuous alignment of sets of curves in curve space (as opposed to a fixed-dimensional featurevector space). The proposed methodology integrates new probabilistic alignment models with model-based curve clustering algorithms. The probabilistic approach allows for the derivation of consistent EM learning algorithms for the joint clustering-alignment problem. Experimental results are shown for alignment of human growth data, and joint clustering and alignment of gene expression time-course data.