It is thought That Mrs. Dolly Kiger named the town in 1874 as well as the craters located northwest of town, after the diamond shaped brand used by the McCoy Ranch.
The post office in the Diamond area has been moved many times since first established in 1887. A.T. Clark set up the first post office in his store April 23, 1887, approximately three miles west of the present town of Diamond. For unknown reasons it was subsequently housed in a new structure constructed by Marion Horton and George Smyth in about 1897. One source indicates the post office has had over seventeen postmasters and assistant postmasters.
At the turn of the century, Diamond was growing into a major merchandising outlet for ranchers, sheepmen, and travelers. It was a common sight to observe camptenders making large purchases in Diamond to restock the solitary sheepherders. Often the herders, as well as camptenders, spent days and sometimes weeks, at Hotel Diamond during periodic rest periods. The two stores in Diamond were centers of much activity, and of course the saloon, with its special charm for people accustomed to solitary living, attracted many clients. At its' zenith, Diamond had a population of about fifty people.
"Old Man Clark", as he was known to his many friends, died in the 1890's and Marion Horton assumed the postmaster's duties as well as managed a store. Clark's general store bacame a popular meeting spot for people dropping in to pick up mail, shopping for supplies, and general socializing with the area's residents.
Around 1907, a stone building was erected by Charlie Hawkins, a local stone mason. The post office was moved to the new structure. A second story was added using the wood from the old Horton store. Clyde Smyth constructed another store across the street from the stone building and Diamond began to grow. Lumber for the Smyth building was taken from Coon Town in Happy Valley. The post office was subsequently moved to the new Smyth store where it remained for a period. A fire later demolished Smyth's business building.
The stone building constructed by Charlie Hawkins came to serve, in addition to being a store and post office, as a community meeting place and dance hall in the early decades of the twentieth century. It became a common occurrence for the residents in the surrounding area to gather on a weekly basis for lively fiddle music, John Barleycorn, and occasional fisticuffs.