In the context of supervised learning, the training data for large-scale hierarchical classification consist of (i) a set of input-output pairs, and (ii) a hierarchy structure defining parent-child relation among class labels. It is often the case that the hierarchy structure given a-priori is not optimal for achieving high classification accuracy. This is especially true for web-taxonomies such as Yahoo! directory which consist of tens of thousand of classes. Furthermore, an important goal of hierarchy design is to render better navigability and browsing. In this work, we propose a maximum-margin framework for automatically adapting the given hierarchy by using the set of input-output pairs to yield a new hierarchy. The proposed method is not only theoretically justified but also provides a more principled approach for hierarchy flattening techniques proposed earlier, which are ad-hoc and empirical in nature. The empirical results on publicly available large-scale datasets demonstrate that classification with new hierarchy leads to better or comparable generalization performance than the hierarchy flattening techniques.