We study the spatial clustering of 538 X-ray selected AGN in the 2 deg2 XMM-COSMOS field that are spectroscopically identified with $I_{\rm AB}<23$ and span the redshift range $z=0.2{-}3.0$. The median redshift and X-ray luminosity of the sample are $z = 0.98$ and $L_{0.5-10}=6.3\times 10^{43}$ erg s-1, respectively. A strong clustering signal is detected at ~$18\sigma$ level, which is the most significant measurement obtained to date for clustering of X-ray selected AGN. By fitting the projected correlation function $w(r_{\rm p})$ with a power law on scales of $r_{\rm p}=0.3{-}40\,h^{-1}$ Mpc, we derive a best-fit comoving correlation length of $r_0 = 8.6\pm0.5\,h^{-1}$ Mpc and slope of $\gamma=1.88\pm0.07$ (Poissonian errors; bootstrap er...