The family Estrildidae (grass-finches) was named by Swainson in 1827 and "finch" can be traced back to the Old English finc but its origin is debated.

The name diamond firetail was first used in the Royal Australian Ornithological Union (RAOU's) second official checklist in 1926.

[3][5] The diamond firetail has a patchy distribution from Southeast Queensland to the Eyre Peninsula in South Australia.

[3] Birdlife Australia has a more extensive distribution from the Carnarvon Ranges in Queensland to the Eyre Peninsula and Kangaroo Island which is broader than other references.

[7] The bird is mostly sedentary and lives in open grassy eucalypt forest and woodland, heath, mallee country, farmland and grassland with scattered trees.

The bird's habitat has been threatened by alteration of vegetation structure caused by over-grazing, weed invasion, salinisation and other flow-on processes.

This loss of main food plants and habitat results in competition with invasive species, and increased predation.

[5] The Slater Field Guide notes the voice is a penetrating twoo-hee or pain, while the Australian Bird Guide describes the contact call as a "drawn out, mournful whistle like descending call of black-eared cuckoo, though typically disyllabic, with first syllable ascending and second descending".

Birdlife Australia records "To safeguard their eggs and nestlings, diamond firetails are often recorded building their nests into the base of the large stick-nest of a bird of prey, such as a whistling kite, white-bellied sea-eagle, wedge-tailed eagle, brown falcon, nankeen kestrel or a square-tailed kite.

[14] The birds will eat lettuce, spinach, chickweed, spray millet, eggfood, broccoli tops, sprouted seed, meal worms, small cockroaches, small crickets, hulled oats and carrot tops.