The Threshold Level Method is an approach that enables comparability across all hydrological levels. This advantage is used especially in studies on drought propagation. There are different calculation procedures for this method. The effect that the choice of a variable versus a constant threshold level method has on drought characteristics and drought propagation patterns has not been fully explored yet. Also, most drought propagation studies have analyzed modelled data, suggesting that applicability to observations be tested. We tested the Constant and the Variable Threshold Level Method for the 10th, 20th and 30th percentile on observed precipitation, streamflow, and groundwater data from Germany, and compared drought characteristics and drought propagation patterns by means of statistical analysis and synoptic assessment. The characteristic effects of choosing a variable versus a constant threshold are: (1) a substantial increase in short droughts, (2) a moderate decrease in intermediate droughts and (3) a minor increase in long droughts. Furthermore, in slow-reacting lowland catchments, theoretical propagation characteristics could mostly be confirmed. In faster-reacting upland catchments, this was not always the case and considerable differences arose. Sources of ambiguity were predominantly groundwater in lowlands and streamflow in the mountainous catchments. In conclusion, there is potential of diverging inference from the same data, depending on the chosen methodology.