Psychometric investigations of diagnostic criteria can be helpful in the refinement of psychiatric instruments. This paper illustrates a methodology for investigating the measurement properties of a set of diagnostic criteria. The analyses are based on a two-dimensional factor analysis model for alcohol abuse and dependence. Based on this model, the methodology shows how cutpoints for diagnoses can be evaluated and defined, with which precision the criteria measure abuse and dependence, how well abuse without dependence can be measured, if the criteria should be weighted or not, if additional criteria are needed to improve measurement, if a smaller number of criteria could be used with almost as good results, and if diagnoses can be made with reliable results. The application of the methodology to the study of alcohol abuse and dependence in general population surveys shows important implications for diagnosis and prevalence estimation based on DSM criteria.