Diamondville's name was derived from the quality of the coal mined here, as it seemed to resemble black diamonds and was of a superior grade.

In 1868, a man by the name of Harrison Church discovered coal on Hamsfork. He built a cabin on the hill where the present town of Diamondville now stands. He succeeded in interesting some men from Minneapolis to form a company of which Church was a stockholder. The Hamsfork Coal Company was incorporated 1884. S.F. Fields, a promoter from Salt Lake City, took management and the Diamond Coal & Coke Company was founded.

The Town of Diamondville was incorporated about 1896 with the Scottish Thomas Sneddon as the first mayor. After the opening of Mine #1 in 1894, most of the first people to settle here came from Almy, Wyoming, where a series of mine explosions had occurred in 1881, 1886, and 1896.

The original town was started on top of the hill south of the present main location because the river had to be rerouted before starting the building of homes in the valley. The town was platted in 1898.

One of the unique features of Diamondville was a flight of 122 stairs made of wood that led to the top of the hill.

The Finn people built the Finn Hall that was used for a meeting place and an entertainment center. The annual "Bobby Burns" celebration was named for the Scottish author Robert Burns. The Slavish people built their own meeting house, which they named the Slavenski Dome. In the 1930s this building was called the "Sloppy Dome." An Italian Lodge was organized on August 13, 1900. Each nationality had its own lodge.

The Diamondville Mine closed in 1928.