This paper describes a method of test data compression for a given test set using statistical encoding. In order to maximize the effectiveness of statistical encoding, the method first converts some specified input values in the test set to unspecified ones without losing fault coverage, and then reassigns appropriate logic values to the unspecified inputs. Experimental results for ISCAS-89 benchmark circuits show that the proposed method can on the average reduce the test data volume to less than 25% of that required for the original test set.