Internal derangement of knee significantly affects daily activities of patients and management of such cases with accurate diagnosis and early treatment is of utmost importance. This study determines the benefits of arthroscopy directly and also compares the sensitivity and specificity of ultrasound, MRI and arthroscopic findings in diagnosing internal derangements of the knee. This is a prospective study of 50 cases that includes patients having knee pain and instability of joint for more than 6 weeks, symptoms of locking of knee joint or effusion and having no bony injury as confirmed by X ray. Results were analysed and sensitivity and specificity were calculated. The present study supports that the clinical diagnosis is of primary necessity, while ultrasound and MRI are additional diagnostic tools in diagnosing IDK. Arthroscopy combines more accurate diagnosing tool and therapeutic modality, which is a more convenient, economical and convincing technique to both surgeon and patient alike. Although ultrasound is less accurate than MRI, it is cost effective and available at most of the peripheral centres. So it is better to do ultrasound rather than MRI for diagnosing IDK in peripheral centres and refer to specialty clinics or tertiary centres for further diagnosis and treatment.