Abstract-- In this paper, we propose a novel test data compression technique named CacheCompress, which combines selective encoding and dynamic dictionary based encoding. Depending on the number of specified bits, a test data word is either encoded in a single code word or as a lookup in the dictionary. Explicit dictionary initialization is not required since the content of the dictionary is updated during testing. The dictionary itself only contains the most recently used patterns, thus it exhibits a behaviour similar to a cache. Experiments show that our technique achieves higher compression ratio than other recent compression schemes while the dictionary size has been dramatically reduced.