Diffun was created as a legal and corporate entity on July 2, 1950 during the incumbency of Congressman Leon C. Cabarroguis and Governor Manolo Maddela of Nueva Vizcaya.

Diffun was former sitio of Barrio San Isidro, Santiago, Isabela since 1926.  Later, before the outbreak of World War 11, Sitio Buntotan was established to become the  barrio site of Diffun. During the survey of Santiago, Isabela ( 1924-1932)  Provincial Governor of Nueva Vizcaya discovered that Diffun is a part  of Nueva Vizcaya.  In the year 1948,  Congressman Leon C. Cabarroguis presented a bill in Congress, Bill No. 1593 which authorizes the President of the Philippines to define the boundaries of Nueva Vizcaya, with bearing and  distance, as maybe prepared by the Bureau of Lands and secured from the most authoritative and latest maps of the Bureau of Coast and Geodetic Survey.  House Bill No. 1593 was made into law pursuant to Republic Act No. 236 which the Provincial Board of Isabela contested its validity.  To settle the boundary dispute between Isabela and Nueva Vizcaya,  Malacañang created a Fact Finding Committee under Administrative Order No. 69, S-1948.  The Fact Finding Committee found out that Diffun legally  belong to the Province of Nueva Vizcaya thus Administrative Order No. 121 was proclaimed uplifting the provisions of RA No. 236. Later, President Elpidio Quirino of the Republic of the Philippines signed Executive Order No. 157 as amended by Executive Order No. 161  implementing  the provisions of the RA No. 236, followed by the issuance of Executive Order No. 466,S-1950 creating the Municipality of DIFFUN.

During the early days an Spanish mestizo named Don Liberato Bayaua acquired the plains and hills of Diffun as his hacienda by virtue of a Titulo Enformasion de Possessoria.  They established and put up a cattle ranch then the Sitio Bontotan.  One of the guardia civiles of his ranch suffered celebral malaria and died after a few days.  The quack doctor termed the cause of death of the guardia civil as Siphon but the two Ilocanos mispronounced it  Di-pon and from that time on the place was known in its present name DIFFUN.