Background: Analyzing interaction networks for functional characterization poses significant challenges arising from the noisy, incomplete, and generic nature of both the interaction data as well as functional annotation of molecules. Network-based methods focus on interacting molecules (pairs or sets) occurring in close proximity to infer functional associations. Results: In this paper we perform a formal comparative investigation of the relationship between functional coherence and topological proximity in networks. We investigate the problem of assessing the coherence of sets of biomolecules (or segments thereof) taking into account functional specificity as well as the distribution of functional attributes across entity groups. We also propose novel measures of topological proximity that are more robust to noisy and incomplete interaction data. Conclusion: We derive the following results in this paper: (i) there exists strong correlation functional similarity and topological proxi...