Estimation of in-situ stresses has significant applications in earth sciences and subsurface engineering, such as fault zone studies, underground CO₂ sequestration, nuclear waste repositories, oil and gas reservoir development, and geothermal energy exploitation. Over the past few decades, Diagnostic Fracture Injection Tests (DFIT), which have also been referred to as Injection-Falloff Tests, Fracture Calibration Tests, and Mini-Frac Tests, have evolved into a commonly used and reliable technique to obtain in-situ stress. Simplifying assumptions used in traditional methods often lead to inaccurate estimation of the in-situ stress, even for a planar fracture geometry. When a DFIT is conducted in naturally fractured reservoirs, the stimulated natural fractures can either alter the effective reservoir permeability within the distance of investigation or interact with the hydraulic fracture to form a complex fracture geometry, this further complicates stress estimation. In this study, we present a new pressure transient model for DFIT analysis in naturally fractured reservoirs. By analyzing synthetic, laboratory and field cases, we found that fracture complexity and permeability evolution can be detected from DFIT data. Most importantly, it is shown that using established methods to pick minimum in-situ stress often lead to over or underestimates, regardless of whether the reservoir is heavily fractured or sparsely fractured. Our proposed “variable compliance method” gives a much more accurate and reliable estimation of in-situ stress in both homogenous and naturally fractured reservoirs. By combining the unique pressure signatures associated with the closure of natural fractures, a lower bound on the horizontal stress anisotropy can be estimated.