During volume testing, test application time, test data volume and high performance automatic test equipment (ATE) are the major cost factors. Embedded testing including built-in self-test (BIST) and multi-site testing are quite effective cost reduction techniques which may make diagnosis more complex. This paper presents a test response compaction scheme and a corresponding diagnosis algorithm which are especially suited for BIST and multi-site testing. The experimental results on industrial designs show, that test time and response data volume reduces significantly and the diagnostic resolution even improves with this scheme. A comparison with X-Compact shows, that simple parity information provides higher diagnostic resolution per response data bit than more complex signatures.