This may be an adaptation for its specialized feeding mode, in which it probes into dense whorls of bamboo for its prey items (Hilty et al. 1979).

Its natural habitat is humid montane forests and it is always found in close association with Chusquea bamboo.

It is typically found at elevations between 1,800 and 3,500 m. The plushcap was formally described in 1842 by the French ornithologist Frédéric de Lafresnaye from a specimen collected in Colombia.

The specific epithet is from the Latin diadema which in turn comes from the Ancient Greek diadēma meaning "royal head-dress".

Plushcaps prefer to live in montane forest or secondary woodland by Chusquea bamboo which they use to find food.

The plushcap looks for insects by probing and pushing its bill into the stems and leaf nodes of the bamboo and prying them open.

Plushcaps are considered of least concern due to their wide range in South America but it is thought that the number of individuals is declining.