Navigation of the upper reaches of the Diyala is not possible because of its narrow defiles, but the river's valley provides an important trade route between Iran and Iraq.

The river is mentioned in Herodotus' Histories under the name Gyndes, where it is stated that the king Cyrus the Great dispersed it by digging 360 channels as punishment after a sacred white horse perished there.

The Battle of Diyala River took place in 693 BC between the forces of the Assyrian empire and the Elamites of southern Iran.

The purpose of the dam is to divert a significant portion of the river to Southwestern Iran for irrigation through the 48 km (30 mi) long Nosoud Water Conveyance Tunnel and to produce hydroelectric power.

[2][3] In Iraq, the river first reaches the Darbandikhan Dam which generates hydroelectric power and stores water for irrigation.