The nonlinearity parameter is frequently measured as a sensitive indicator in damaged material characterization or tissue harmonic imaging. Several previous studies have employed the plane wave solution, and ignored the effects of beam diffraction when measuring the non-linearity parameter . This paper presents a multiGaussian beam approach to explicitly derive diffraction corrections for fundamental and second harmonics under quasilinear and paraxial approximation. Their effects on the nonlinearity parameter estimation demonstrate complicated dependence of on the transmitter-receiver geometries, frequency, and propagation distance. The diffraction effects on the non-linearity parameter estimation are important even in the nearfield region. Experiments are performed to show that improved values can be obtained by considering the diffraction effects.