This prospective study was carried out in the orthopaedic department of a medical college to evaluate the accuracy of clinical diagnosis by knee arthroscopy. The reliability of clinical assessment (history and physical examination) was determined by comparing the initial pre-operative diagnosis with the postoperative diagnosis as determined by arthroscopy. The study group included 50 patients (50 knees) scheduled for arthroscopic surgery for suspected internal derangements of knees. The primary pre-operative diagnosis was fully correct in 16 cases (32%), partially correct in 16 cases (32%), and incorrect in 18 cases (36%), with an overall accuracy of 81%, sensitivity 82% and specificity 62%. The most common pre-operative diagnosis was medial meniscal tear and anterior cruciate ligament tear. The results of clinical assessment were comparable to the published reports. Though the present study suggests that the diagnostic value of arthroscopy is higher than clinical examination but it also makes it apparent that the two techniques complement each other and are more accurate when taken together than individually.