In 1901, the Alberta Railway and Coal Company had title to the land now known as the townsite of Diamond City. The mine officials in the new village applied to have it named Black Diamond after the coal seams that were found by the Diamond Coal Company, but another town in Alberta had already applied for the name, so officials named the village Diamond City. Homesteaders settled on quarter sections of land and if they improved it and lived on it for a year, it was theirs.
Each year more and more prairie was cultivated, the biggest land breaking taking place in 1923. Having the promise of good crops because of the irrigation systems, many new settlers purchased land. Schools and churches were built and the community blossomed. Over the years the mine began to dwindle and the town of nearly 800 people began to diminish. The town status was changed to a hamlet. A total of 184 live in Diamond City (2016 Statistics Canada) and is approximately 13km north of Lethbridge.