This study evaluates potential sources of errors in k-NN(k-nearest neighbor) algorithm such as procedures, variables, and input data. Previous research has been thoroughly reviewed for understanding fundamentals of k-NN algorithm that has been widely used for short-term traffic states prediction. The framework of this algorithm commonly includes historical data smoothing, pattern database, similarity measure, k-value, and prediction horizon. The outcomes of this study suggests that: i) historical data smoothing is recommended to reduce random noise of measured traffic data; ii) the historical database should contain traffic state information on both normal and event conditions; and iii) trial and error method can improve the prediction accuracy by better searching for the optimum input time series and k-value. The study results also demonstrates that predicted error increases with the duration of prediction horizon and rapidly changing traffic states.