Abstract: The present invention relates to layouts with geometrical objects, and more particularly, to a system and method for compacting layouts in two dimensions simultaneously. In an embodiment, the system and method of the present invention are applied to IC layouts. The present invention provides for compacting layouts in two dimensions at once without depending on expensive methods such as Branch and Bound. As a result, in an embodiment, the present invention can be applied to large layouts in much the same way as conventional, one dimensional compaction systems and methods. The present invention also provides for compacting hierarchical layouts in two dimensions at once while preserving the complete hierarchy.