A dynamic run-length encoding scheme compresses data streams more effectively than conventional run-length encoding, which uses a fixed group length for encoding. With dynamic compression according to the invention, the group length is dynamically modified by the bitstream itself. This allows for greater efficiency in compression. As with run-length encoding, the actual compression ratio is a function of the particular bitstream. However, for identical bitstreams, the invention achieves greater compression than run-length encoding. The invention has applications in compressing data that is used to program a programmable logic device, thereby effectively increasing the capacity of storage, such as Serial EPROM's, used for PLD programming files.