Studies suggest that the prevalence of paraphrenia in the elderly population is around 2-4%.

Individuals who develop paraphrenia have a life expectancy similar to the normal population. Recovery from the psychotic symptoms seems to be rare, and in most cases paraphrenia results in in-patient status for the remainder of the life of the patient. Patients experience a slow deterioration of cognitive functions and the disorder can lead to dementia in some cases, but this development is no greater than the normal population.

Some critical psychiatrists criticize the practice of defining one and the same belief as normal in one culture and pathological in another culture for cultural essentialism. They argue that since cultural influences are mixed, including not only parents and teachers but also peers, friends, books and the internet, and the same cultural influence can have different effects depending on earlier cultural influences, the assumption that culture can be boiled down to a few traceable, distinguishable and statistically quantifiable factors and that everything that does not fall in those factors must be biological, is not a justified assumption. Other critical psychiatrists argue that just because a person's belief is unshaken by one influence does not prove that it would remain unshaken by another. For example, a person whose beliefs are not changed by verbal correction from a psychiatrist, which is how delusion is usually diagnosed, may still change his or her mind when observing empirical evidence, only that psychiatry rarely if ever present patients with such situations.

The modern definition and Jaspers' original criteria have been criticised, as counter-examples can be shown for every defining feature.

Studies on psychiatric patients show that delusions vary in intensity and conviction over time, which suggests that certainty and incorrigibility are not necessary components of a delusional belief.

Delusions do not necessarily have to be false or 'incorrect inferences about external reality'. Some religious or spiritual beliefs by their nature may not be falsifiable, and hence cannot be described as false or incorrect, no matter whether the person holding these beliefs was diagnosed as delusional or not.

In other situations the delusion may turn out to be true belief. For example, in delusional jealousy, where a person believes that their partner is being unfaithful (and may even follow them into the bathroom believing them to be seeing their lover even during the briefest of partings), it may actually be true that the partner is having sexual relations with another person. In this case, the delusion does not cease to be a delusion because the content later turns out to be verified as true or the partner actually chose to engage in the behavior of which they were being accused.

In other cases, the delusion may be assumed to be false by a doctor or psychiatrist assessing the belief, because it "seems" to be unlikely, bizarre or held with excessive conviction. Psychiatrists rarely have the time or resources to check the validity of a person’s claims leading to some true beliefs to be erroneously classified as delusional. This is known as the Martha Mitchell effect, after the wife of the attorney general who alleged that illegal activity was taking place in the White House. At the time, her claims were thought to be signs of mental illness, and only after the Watergate scandal broke was she proved right (and hence sane).

Similar factors have led to criticisms of Jaspers' definition of true delusions as being ultimately 'un-understandable'. Critics (such as R. D. Laing) have argued that this leads to the diagnosis of delusions being based on the subjective understanding of a particular psychiatrist, who may not have access to all the information that might make a belief otherwise interpretable. R. D. Laing's hypothesis has been applied to some forms of projective therapy to "fix" a delusional system so that it cannot be altered by the patient. Psychiatric researchers at Yale University, Ohio State University and the Community Mental Health Center of Middle Georgia have used novels and motion picture films as the focus. Texts, plots and cinematography are discussed and the delusions approached tangentially. This use of fiction to decrease the malleability of a delusion was employed in a joint project by science-fiction author Philip Jose Farmer and Yale psychiatrist A. James Giannini. They wrote the novel "Red Orc's Rage", which, recursively, deals with delusional adolescents who are treated with a form of projective therapy. In this novel's fictional setting other novels written by Farmer are discussed and the characters are symbolically integrated into the delusions of fictional patients. This particular novel was then applied to real-life clinical settings.

Another difficulty with the diagnosis of delusions is that almost all of these features can be found in "normal" beliefs. Many religious beliefs hold exactly the same features, yet are not universally considered delusional. These factors have led the psychiatrist Anthony David to note that "there is no acceptable (rather than accepted) definition of a delusion." In practice, psychiatrists tend to diagnose a belief as delusional if it is either patently bizarre, causing significant distress, or excessively pre-occupying the patient, especially if the person is subsequently unswayed in belief by counter-evidence or reasonable arguments.

It is important to distinguish true delusions from other symptoms such as anxiety, fear, or paranoia. To diagnose delusions a mental state examination may be used. This test includes appearance, mood, affect, behavior, rate and continuity of speech, evidence of hallucinations or abnormal beliefs, thought content, orientation to time, place and person, attention and concentration, insight and judgment, as well as short-term memory.

Johnson-Laird suggests that delusions may be viewed as the natural consequence of failure to distinguish conceptual relevance. That is, the person takes irrelevant information and puts it in the form of disconnected experiences, then it is taken to be relevant in a manner that suggests false causal connections. Furthermore, the person takes the relevant information, in the form of counterexamples, and ignores it.

In the DSM-IV-TR, paranoia is diagnosed in the form of:

- paranoid personality disorder ()

- paranoid schizophrenia (a subtype of schizophrenia) ()

- the persecutory type of delusional disorder, which is also called "querulous paranoia" when the focus is to remedy some injustice by legal action. ()

According to clinical psychologist P. J. McKenna, "As a noun, paranoia denotes a disorder which has been argued in and out of existence, and whose clinical features, course, boundaries, and virtually every other aspect of which is controversial. Employed as an adjective, paranoid has become attached to a diverse set of presentations, from paranoid schizophrenia, through paranoid depression, to paranoid personality—not to mention a motley collection of paranoid 'psychoses', 'reactions', and 'states'—and this is to restrict discussion to functional disorders. Even when abbreviated down to the prefix para-, the term crops up causing trouble as the contentious but stubbornly persistent concept of paraphrenia".

At least 50% of the diagnosed cases of schizophrenia experience delusions of reference and delusions of persecution. Paranoia perceptions and behavior may be part of many mental illnesses, such as depression and dementia, but they are more prevalent in three mental disorders: paranoid schizophrenia, delusional disorder (persecutory type), and paranoid personality disorder.

A popular symptom of paranoia is the attribution bias. These individuals typically have a biased perception of reality, often exhibiting more hostile beliefs. A paranoid person may view someone else's accidental behavior as though it is with intent or threatening.

An investigation of a non-clinical paranoid population found that feeling powerless and depressed, isolating oneself, and relinquishing activities are characteristics that could be associated with those exhibiting more frequent paranoia.

Some scientists have created different subtypes for the various symptoms of paranoia including erotic, persecutory, litigious, and exalted.

Due to the suspicious and troublesome personality traits of paranoia, it is unlikely that someone with paranoia will thrive in interpersonal relationships. Most commonly paranoid individuals tend to be of a single status. According to some research there is a hierarchy for paranoia. The least common types of paranoia at the very top of the hierarchy would be those involving more serious threats. Social anxiety is at the bottom of this hierarchy as the most frequently exhibited level of paranoia.

There are some brief tests (5–15 minutes) that have reasonable reliability to screen for dementia.

While many tests have been studied, presently the mini mental state examination (MMSE) is the best studied and most commonly used. The MMSE is a useful tool for helping to diagnose dementia if the results are interpreted along with an assessment of a person's personality, their ability to perform activities of daily living, and their behaviour. Other cognitive tests include the abbreviated mental test score (AMTS), the, "Modified Mini-Mental State Examination" (3MS), the "Cognitive Abilities Screening Instrument" (CASI), the Trail-making test, and the clock drawing test. The MOCA (Montreal Cognitive Assessment) is a very reliable screening test and is available online for free in 35 different languages. The MOCA has also been shown somewhat better at detecting mild cognitive impairment than the MMSE.

Another approach to screening for dementia is to ask an informant (relative or other supporter) to fill out a questionnaire about the person's everyday cognitive functioning. Informant questionnaires provide complementary information to brief cognitive tests. Probably the best known questionnaire of this sort is the "Informant Questionnaire on Cognitive Decline in the Elderly (IQCODE)". There is not sufficient evidence to determine how accurate the IQCODE is for diagnosing or predicting dementia. The Alzheimer's Disease Caregiver Questionnaire is another tool. It is about 90% accurate for Alzheimer's and can be completed online or in the office by a caregiver. On the other hand, the "General Practitioner Assessment Of Cognition" combines both, a patient assessment and an informant interview. It was specifically designed for the use in the primary care setting.

Clinical neuropsychologists provide diagnostic consultation following administration of a full battery of cognitive testing, often lasting several hours, to determine functional patterns of decline associated with varying types of dementia. Tests of memory, executive function, processing speed, attention, and language skills are relevant, as well as tests of emotional and psychological adjustment. These tests assist with ruling out other etiologies and determining relative cognitive decline over time or from estimates of prior cognitive abilities.

Routine blood tests are also usually performed to rule out treatable causes. These tests include vitamin B, folic acid, thyroid-stimulating hormone (TSH), C-reactive protein, full blood count, electrolytes, calcium, renal function, and liver enzymes. Abnormalities may suggest vitamin deficiency, infection, or other problems that commonly cause confusion or disorientation in the elderly.