A method for processing color image data to generate multi-level image data with arbitrary output levels and arbitrary level spacing. The method identifies a gray level spacing for each of a first and second color separation pixels and scales the gray level for each of the first and color separation pixels scaled to a common level spacing in relation to their corresponding gray level spacing. The scaled gray levels are then be thresholded to one of the two multi-level output values corresponding to the bounds of the gray level spacing.