Reliability and differential item functioning (DIF) analyses were conducted on testlets displaying local item dependence in this study. The data set employed in the research was obtained from the answers given by 1500 students to the 20 items included in six testlets given in English Proficiency Exam by the School of Foreign Languages of a state University in Turkey. One of the purposes of this study was to determine the influences of the tests composed of testlets on reliability, so the reliability coefficients obtained for cases where the influences of testlets were considered and those for cases where the testlet influences were not considered were compared. In consequence of the G theory analyses conducted in this context, it was found that the G and Phi coefficients estimated by not considering the testlet effects were higher than those estimated by considering the testlet effects. It was concluded that the reliability was estimated to be relatively higher when the influences of the testlet were not considered. Two methods were used in this study so as to determine the effects of testlets on differential item functioning and the results were compared. In the DIF-determining method considering the testlet effect, both the number of items displaying DIF at the significant and estimated levels of DIF were found to be higher than in the method not considering the testlet effect.