Methods for characterizing high speed DAC using multi-level signals are disclosed. This invention relates to communication systems, and more particularly to testing of high speed DACs. Present day technology uses ramp or sinusoidal signal for testing DACs, which is insufficient in different scenarios. For example, if the DAC is being used for generating broadband signals for high speed communication links, the dynamic effects are important and are not characterized properly by the ramp or sinusoidal testing techniques..The proposed method uses eye-diagram measurement of visualizing dynamic behaviour. The error band along with traditional static DAC characteristics like DNL and INL for testing a DAC. Eye-diagram outputs are generated from a DAC for a random input data, which could be used to analyze DAC performance.