  We present the coupled-cluster singles and doubles method formulated in terms
of truncated pair-natural orbitals (PNO) that are optimized to minimize the
effect of truncation. Compared to the standard ground-state PNO coupled-cluster
approaches, in which truncated PNOs derived from first-order M{\o}ller-Plesset
(MP1) amplitudes are used to compress the CC wave operator, the
iteratively-optimized PNOs ("iPNOs") offer moderate improvement for small PNO
ranks but rapidly increase their effectiveness for large PNO ranks. The error
introduced by PNO truncation in the CCSD energy is reduced by orders of
magnitude in the asymptotic regime, with an insignificant increase in PNO
ranks. The effect of PNO optimization is particularly effective when combined
with Neese's perturbative correction for the PNO incompleteness of the CCSD
energy. The use of the perturbative correction in combination with the PNO
optimization procedure seems to produce the most precise approximation to the
canonical CCSD energies for small and large PNO ranks. For the standard
benchmark set of noncovalent binding energies remarkable improvements with
respect to standard PNO approach range from a factor of 3 with PNO truncation
threshold $\tau_\text{PNO}=10^{-6}$ (with the maximum PNO truncation error in
the binding energy of only 0.1 kcal/mol) to more than 2 orders of magnitude
with $\tau_\text{PNO}=10^{-9}$.
