The diagnosis of developmental dyslexia (DD) is reliant on a discrepancy between intellectual functioning and reading achievement. Discrepancy-based formulae have frequently been employed to establish the significance of the difference between 'intelligence' and 'actual' reading achievement. These formulae, however, often fail to take into consideration test reliability and the error associated with a single test score. This paper provides an illustration of the potential effects that test reliability and measurement error can have on the diagnosis of dyslexia, with particular reference to discrepancy models. The roles of reliability and standard error of measurement (SEM) in classic test theory are also briefly reviewed. This is followed by illustrations of how SEM and test reliability can aid with the interpretation of a simple discrepancy-based formula of DD. It is proposed that a lack of consideration of test theory in the use of discrepancy-based models of DD can lead to misdiagnosis (both false positives and false negatives). Further, misdiagnosis in research samples affects reproducibility and generalizability of findings. This in turn, may explain current inconsistencies in research on the perceptual, sensory, and motor correlates of dyslexia.