Misalignment is probably the main cause for failure of the rotating machinery. Due to misalignment, excessive stresses and vibrations arise in the system which cause failure of different components of rotating system. The present work is therefore taken up to predict the unique vibration spectrum characteristics for diagnosing parallel misalignment at varying operating conditions and for different geometrical parameters. In the present study, the work has been carried out to establish relationship between parallel misalignment and harmonic frequency components of its vibration signature by experimental and numerical method. An innovative experimental set-up with provisions for changing geometrical as well as operational parameters has been developed for the study of parallel misalignment. To set precise predetermined parallel misalignment values the compound slide table with rotating calibrated wheels was used along with the latest laser alignment system. It was noticed that, in the prediction of misalignment, the knowledge of natural frequency of the system is essential. The natural frequency of the setup is determined experimentally using modal analysis. The significant characteristic frequency components obtained from vibration signature are correlated with resonance frequency.