One embodiment of the present invention provides an apparatus that selectively encodes bus grant lines to reduce I/O pin requirements. This apparatus includes a semiconductor chip with bus arbitration circuit. A number of grant lines emanate from the bus arbitration circuit. An encoder circuit encodes the grant lines into a smaller number of encoded grant lines. A selector circuit selects outputs from between the encoded grant lines and a first subset of grant lines. These outputs pass through output pins off of the semiconductor chip. During a first mode of operation, the first subset of grant lines is driven through the plurality of output pins. During a second mode of operation, the encoded grant lines are driven through the output pins. A variation on the above embodiment includes a number of bus request lines, which are divided into a first subset and a second subset. The first subset of request lines feeds through a number of input pins into the bus arbitration circuit. During the first mode of operation, the second subset of request lines feeds from off of the semiconductor chip through a number of I/O pins and bi-directional buffers into the bus arbitration circuit. During the second mode of operation, the second subset of grant lines feeds from the bus arbitration circuit, through the bi-directional buffers and I/O pins and off of the semiconductor chip.