Cell contact, movement and directionality are important factors in biological development (morphogenesis), and myxobacteria are a model system for studying cell-cell interaction and cell organization preceding differentiation. When starved, thousands of myxobacteria cells align, stream and form aggregates which later develop into round, non-motile spores. Canonically, cell aggregation has been attributed to attractive chemotaxis, a long range interaction, but there is growing evidence that myxobacteria organization depends on contact-mediated cell-cell communication. We present a discrete stochastic model based on contact-mediated signaling that suggests an explanation for the initialization of early aggregates, aggregation dynamics and final aggregate distribution. Our model qualitatively reproduces the unique structures of myxobacteria aggregates and detailed stages which occur during myxobacteria aggregation: first, aggregates initialize in random positions and cells join aggregates by random walk; second, cells redistribute by moving within transient streams connecting aggregates. Streams play a critical role in final aggregate size distribution by redistributing cells among fewer, larger aggregates. The mechanism by which streams redistribute cells depends on aggregate sizes and is enhanced by noise. Our model predicts that with increased internal noise, more streams would form and streams would last longer. Simulation results suggest a series of new experiments.