We study the performance of diffusion least-mean squares algorithms for distributed parameter estimation in multi-agent networks when nodes exchange information over wireless communication links. Wireless channel impairments, such as fading and path-loss, adversely affect the exchanged data and cause instability and performance degradation if left unattended. To mitigate these effects, we incorporate equalization coefficients into the diffusion combination step and update the combination weights dynamically in the face of randomly changing neighborhoods due to fading conditions. When channel state information (CSI) is unavailable, we determine the equalization factors from pilot-aided channel coefficient estimates. The analysis reveals that by properly monitoring the CSI over the network and choosing sufficiently small adaptation step-sizes, the diffusion strategies are able to deliver satisfactory performance in the presence of fading and path loss.