Its specific epithet diffusa refers to the distinctive diffuse margin of its thallus, a characteristic that helps distinguish it from similar species.

[4] Xanthocarpia diffusa is a crustose lichen characterised by its yellow to ochre-yellow or greyish-yellow thallus (main body) that forms patches up to several cm in diameter.

A distinctive feature is its diffuse thallus margin, which is often bordered by a white or pale grey prothallus (a preliminary growth stage of the lichen).

The species can also be found in inland locations, but these occurrences are relatively rare and typically restricted to periodically inundated areas, such as the beds of seasonal streams.

[1] Unlike many related species in its family that prefer calcareous (limestone) substrates, X. diffusa is primarily found on siliceous rocks.

In its coastal habitats, it often occurs in the supralittoral zone – the area above the high tide line that receives regular spray from waves but is not submerged.