It reached number one on the Australian Recording Industry Association (ARIA) Albums Chart and received a rating of 71 (out of 100) on review aggregator Metacritic.

Though Launay had produced the band's three previous albums, lead singer Daniel Johns decided he needed someone "who understood where he wanted to go".

[2] Johns initially recorded eight songs, only to delete the files thinking they were too similar to tracks on the previous album, Neon Ballroom.

Johns felt more comfortable in making this radical change rather than a minor one, finding it helped him to regain his passion for music, which had diminished during the grunge days.

[2] Johns wrote much of the album at a baby grand piano; he had previously taught himself the instrument and composed songs on it for the first time with Diorama.

This change in songwriting technique had a significant effect on the sound of the album; Johns commented on the difference in how his vocals resonated with piano as compared to guitar.

[3] He worked with others in developing the album; Van Dyke Parks (Beach Boys, U2) collaborated on orchestral arrangements, and the pair spent much of their recording time attempting to describe the music in metaphorical terms, with Johns describing Parks' orchestral swells as "tidal waves" and violins as "a flock of birds".

[5] Silverchair intended to tour supporting Diorama following its release, but plans were postponed when Johns developed reactive arthritis, causing his joints to swell and making guitar playing and singing too painful.

[19] The song was first announced by Silverchair bass guitarist Chris Joannou in November 1999, when he told fans the band had "a very small cache of recorded material stored away", including "Without You".

Kemp spoke highly of the "heavy orchestration, unpredictable melodic shifts and a whimsical pop sensibility", also noting Parks' arrangements gave the music "more breadth and depth".

He argued that the album's strength was a product of Johns' confidence, resulting in high quality on "World Upon Your Shoulders", "Tuna in the Brine", and "After All These Years".

[33] Bradley Torreano, of review website AllMusic, gave Diorama four stars, labelling it an AMG Album Pick.

[25] Bottrill's production was praised, and the result likened to Big Country and U2, while Johns showcased "his rich voice and shockingly catchy tunes with a gusto missing from their earlier albums".

The majority of songs on the album were rated highly; she thought "The Greatest View" was a stand-out with "orchestral twangs", and "After All These Years" had "sweeping horns, introspective lyrics and soft, haunting vocals".

's music website gave Diorama a positive review, agreeing that the band had matured greatly since their early high-school releases.

The pop songs on the album, "Luv Your Life" and "Too Much of Not Enough", were said to "glide", and O'Connor praised Johns for "whisper[ing] his lyrics with grace and subtlety" where in the past he would "shout in angst", drawing comparisons to Elliott Smith.