We consider the combined hubbing and routing problem in postal delivery systems and develop an iterative two-stage solution procedure for the problem. In the first stage, hub locations are determined and postal offices are multiply allocated to the hubs. The second stage gives the routes in hub regions that alter the distances between points used in the hub-location problem. The procedure then iterates between two stages by updating the distances used in hubbing in order to produce a route-compatible hub configuration. Computational experience is reported for the test problems taken from the literature. For a case study Turkish postal delivery system data are utilized. As the case study is applied on a road network, a final stage, seeking improvements based on special structures in the routed network, is appended to the two-stage solution procedure.