Single probe formation testers are widely used tools in the oil industry for collecting fluid samples and measuring pressure transients to estimate initial formation pressure. Although in principle pressure transient data can be used to estimate formation permeability based on drawdown and buildup analyses, the permeablity estimated is rarely used in reality since these estimation methods are based on a single-layer or homogeneous reservoir which is rarely the case. There are many probe test data available in the industry. If we can use these data to estimate permeabilities from every location the tool is stopped and upscale these permeabilities to predict the well productivity index (PI) for the whole multilayer reservoir, then these pressure transient data become very valuable. This can save the cost of or completely replace expensive well tests. In this paper, we study the effect of the distance of outer layers on permeability estimation in multilayer reservoir systems. We first investigate the effective radius of drawdown and buildup tests of a typical probe test in a multilayer reservoir. Then we define a dimensionless parameter to present this effective radius. This dimensionless parameter is a function of permeability and the distance from the probe to the outer layer. Within this effective radius, the permeability may be estimated within an acceptable engineering error. A new method is proposed to estimate the well productivity of a multilayer reservoir from single probe tests. The estimated well productivity is compared with that from the conventional well tests using simulated data as well as actual test data. The productivities from our test analysis technique and other approaches are acceptably close. Therefore, this effective dimensionless radius may be used to guide the selection of test locations so that the test data can be used later to estimate the PI of a well.