The present invention is directed to a system and method for test target selection in conjunction with dynamic test pattern generation. In the invention, a test pattern page(s) is composed using an optimal set of test targets, which can be accommodated or adjusted to fit within size constraints of the test pattern. The method of the present invention makes use of layout optimization to ensure that related and optimized test targets are accommodated on a single test pattern. For example, it may be preferable to “squeeze in” a smaller-than-normal uniform area target, rather than not to print it at all during a test.