In this paper, we focus on the use of signature-based output compaction technique for built-in self-testing of VLSI circuits. We give algorithm for single-output and multiple-output signature generation using exhaustive test patterns extending the syndrome conccpt. The signature wc develop is a functional signature and is very effective for both input and internal line fault detection, as seen from simulation on various benchmark circuits. The signature generators can bc easily implemented using the current VLSI technology.