Manufacturing flexibility is commonly thought to require radical changes in business processes requiring large amounts of capital. This paper is an attempt to investigate the relationships between manufacturing flexibility and continuous improvement practices. It is hypothesized that continuous improvement efforts increase manufacturing flexibility by increasing the available manufacturing capacity. This paper introduces a measure of capacity-related flexibility, called the Capacity Flexibility Index (CFI), that measures the capability of the capacity available to deal with any changes in demand. Also, it defines a measure, called the Potential of Continuous Improvement (PCI), as a measure of the potential for continuous improvement efforts to improve manufacturing flexibility. These propositions are examined using data from a case study in an electronics manufacturing firm. This research results in significant relationships (with positive correlations) between volume, delivery time, product mix, and new product flexibilities and capacity flexibility, represented by CFI. Also, it is found that to improve flexibility, effectiveness of continuous improvement is significantly associated (with positive correlation) to the value of PCI. It suggests that there is a limit in using continuous improvement to increase flexibility. Since it is a single case study, generalization to all cases is limited until relationships are studied further using a reasonable number of cases.