Diabetic Retinopathy (DR) is an important global health concern and it can causes blindness. Early detection and treatment can prevent the patients from loss their vision. This study presents an approach of color image segmentation for automatic exudate detection. The color retinal images are converted into four different color spaces and preprocessed by applying Contrast Limited Adaptive Histogram Equalization (CLAHE). Fuzzy C-Means (FCM) and K-means clustering (KMC) algorithms are applied on the preprocessed image for the segmentation purpose. Then, optic disc is detected and eliminated by using Circular Hough Transform (CHT). Performance evaluation of developed algorithm is done using Structured Analysis of the Retina (STARE) dataset. The proposed algorithm achieved sensitivity of 93.4% for STARE datasets for LUV color space with KMC.