Functional severity of coronary stenosis is often assessed using diagnostic parameters. These parameters are evaluated from the combined pressure and/or flow measurements taken at the site of the stenosis. However, when there are functional collaterals operating downstream to the stenosis, the coronary flow-rate increases, and the pressure in the stenosed artery is altered. This effect of downstream collaterals on different diagnostic parameters is studied using a physiological representative in vitro coronary flow-loop. The three diagnostic parameters tested are fractional flow reserve (FFR), lesion flow coefficient (LFC), and pressure drop coefficient (CDP). The latter two were discussed in recent publications by our group (Banerjee et al., 2007, 2008, 2009). They are evaluated for three different severities of stenosis and tested for possible misinterpretation in the presence of variable collateral flows. Pressure and flow are measured with and without downstream collaterals. The diagnostic parameters are then calculated from these readings. In the case of intermediate stenosis (80% area blockage), FFR and LFC increased from 0.74 to 0.77 and 0.58 to 0.62, respectively, for no collateral to fully developed collateral flow. Also, CDP decreased from 47 to 42 for no collateral to fully developed collateral flow. These changes in diagnostic parameters might lead to erroneous postponement of coronary intervention. Thus, variability in diagnostic parameters for the same stenosis might lead to misinterpretation of stenosis severity in the presence of operating downstream collaterals.