Most surgeons believe that varus deformity leads to progressive tightness of the medial soft tissue envelope and laxity on the lateral side. It is, however, unclear at what stage of the deformity such ligament alterations occur, and whether these are the consequence of intrinsic alterations in the ligaments themselves, or rather due to extrinsic factors such as osteophytes, adhesions to the underlying bone, or other factors which may cause a tightening effect. Thirty-five varus knees that were scheduled for TKA were investigated. Ligament status was evaluated after temporary correction of alignment and removal of osteophytes, using varus/valgus testing with computer navigation technology. Knees with <10 degrees varus deformity were easily correctable to neutral after correction of the extrinsic factors that could cause medial tightness, and these knees maintained normal mediolateral laxity during varus/valgus stress testing. When coronal plane deformity exceeded 10 degrees, progressive shortening of the medial collateral ligament was noted, as well as progressive stretching of the lateral structures (P < 0.001). This study, therefore, demonstrates that the medial collateral structures become intrinsically shortened when preoperative varus deformity exceeds 10 degrees. Likewise, the lateral soft tissues become stretched. None of these occur when the preoperative deformity is <10 degrees.