Aspects of the invention relate to techniques for chain fault diagnosis based on dynamic circuit design partitioning. Fan-out cones for scan cells of one or more faulty scan chains of a circuit design are determined and combined to derive a forward-tracing cone. Fan-in cones for scan cells of the one or more faulty scan chains and for failing observation points of the circuit design are determined and combined to derive a backward-tracing cone. By determining intersection of the forward-tracing cone and the backward-tracing cone, a chain diagnosis sub-circuit for the test failure file is generated. Using the process, a plurality of chain diagnosis sub-circuits may be generated for a plurality of test failure files. Scan chain fault diagnosis may then be performed on the plurality of chain diagnosis sub-circuits with a plurality of computers.