A capacity control algorithm for a multiple compressor liquid chiller system is provided wherein the speed and number of compressors in operation are controlled in order to obtain a leaving liquid temperature setpoint. In response to an increase in the load in the chiller system, the algorithm determines if a compressor should be started and adjusts the operating speed of all operating compressors when an additional compressor is started. In response to a decrease in the load in the chiller system with multiple compressors operating, the algorithm determines if a compressor should be de-energized and adjusts the operating speed of all remaining operating compressors when a compressor is de-energized.