This paper describes algorithms for generating low intermodulation-distortion (IMD) two-tone sinewaves, for such as communication application ADC testing, using an arbitrary waveform generator (AWG) or a multi-bit ΣΔ DAC inside an SoC. The nonlinearity of the DAC generates distortion components, and we propose here eight methods to precompensate for the IMD using DSP algorithms and produce low-IMD two-tone signals. Theoretical analysis, simulation, and experimental results all demonstrate the effectiveness of our approach.