Dilution occurs in laser cladding when elements from the substrate intermix with the coating material in the melt pool thereby affecting the clad properties. While it is a general observation that dilution degrades the clad quality, a controlled Fe dilution in TribaloyTM T800 can prove to be beneficial. TribaloyTM T800 (composition: 18 % Cr, 28 % Mo, 3.5 % Si, bal. Co (all values in wt.%)) exhibits an attractive combination of wear and corrosion resistance properties from cryogenic temperatures up to 1000°C in low lubricated conditions but shows low fracture toughness due to the hard brittle Laves phase embedded in the softer Co solid solution in large proportions. Studies have shown that Fe addition to T800 can reduce the Laves phase proportion thus enhancing the modulus of rupture. In this study, the effect of dilution occurring during laser deposition of T800 on AISI 316 stainless steel substrate has been investigated and the results indicate that highly diluted clad showed enhanced toughness without much compromise to wear resistance.