Background: Bile acid diarrhoea is often missed because gold standard nuclear medicine tauroselcholic [75-Se] acid (SeHCAT) testing has limited availability. Empirical treatment effect has unknown diagnostic performance, whereas plasma 7α-hydroxy-4-cholesten-3-one (C4) is inexpensive but lacks sensitivity. Aims: To determine diagnostic characteristics of empirical treatment and explore improvements in diagnostics with potential better availability than SeHCAT. Methods: This diagnostic accuracy study was part of a randomised, placebo-controlled trial of colesevelam. Consecutive patients with chronic diarrhoea attending SeHCAT had blood and stool sampled. Key thresholds were C4 > 46 ng/mL and SeHCAT retention ≤10%. A questionnaire recorded patient-reported empirical treatment effect. We analysed receiver operating characteristics and explored machine learning applied logistic regression and decision tree modelling with internal validation. Results: Ninety-six (38%) of 251 patients had SeHCAT retention ≤10%. The effect of empirical treatment assessed with test results for bile acid studies blinded had 63% (95% confidence interval 44%–79%) sensitivity and 65% (47%–80%) specificity; C4 > 46 ng/mL had 47% (37%–57%) and 92% (87%–96%), respectively. A decision tree combining C4 ≥ 31 ng/mL with ≥1.1 daily watery stools (Bristol type 6 and 7) had 70% (51%–85%) sensitivity and 95% (83%–99%) specificity. The logistic regression model, including C4, the sum of measured stool bile acids and daily watery stools, had 77% (58%–90%) sensitivity and 93% (80%–98%) specificity. Conclusions: Diagnosis of bile acid diarrhoea using empirical treatment was inadequate. Exploration suggested considerable improvements in the sensitivity of C4-based testing, offering potential widely available diagnostics. Further validation is warranted. ClinicalTrials.gov: NCT03876717.