Early Eskimos on the islands were fearless men of the ice and sea, with an advanced culture practicing elaborate whale-hunting ceremonies. They traded with both continents. The islands were named in 1728 by Vitus Bering in honor of Saint Diomede. The 1880 census counted 40 people, all Ingalikmiut Eskimos, in the village of "Inalet." When the Iron Curtain was formed, Big Diomede became a Soviet military base and all Native residents were moved to mainland Russia. During World War II, Little Diomede residents who strayed into Soviet waters were taken captive. It wasn’t until the 1980's that families have been able to reunite and visit one another.

The City was incorporated in 1970. Some residents are interested in relocating the village, due to the rocky slopes and harsh storms, lack of useable land for housing construction, and inability to construct a water/sewer system, landfill or airport.

A federally recognized tribe is located in the community -- the Native Village of Diomede (a.k.a. Inalik). 93.8% of the population are Alaska Native or part Native. Diomede is a traditional Ingalikmiut Eskimo village with a subsistence lifestyle. Seal, polar bear, blue crab, and whale meat are the preferred foods. Mainland Natives come to Diomede to hunt polar bears. Seal and walrus hides are used to make individual clothing items, parkas, hats, mukluks, and furs and skins for trade. Villagers scale the island’s rocky edges and plateau to forage for berries and edible plants.

Durable goods are brought in by barge once a year, and if conditions are right, mail can be delivered once a week, usually by helicopter. The closest U.S. community on the mainland is Wales, which is 28 miles across the Bering Strait by boat. The sale or importation of alcohol is banned in the village.