During the early days, a Spanish Mestizo named Don Liberato Bayaua acquired the plains and hills of Diffun as his hacienda by virtue of a Titulo Enformacion de Possessoria. He established a cattle ranch at then the Sitio Buntotan. One of the Guardia Civil at his ranch suffered celebral malaria and died after a few days. A quack doctor termed the cause of death as siphon but two Ilocanos mispronounced it as dipon. Since then, the place was known in its present name as Diffun.

Since 1926, Diffun was claimed as part of Isabela Province, particularly the Municipality of Santiago. But in 1932, further researches conducted by the Municipal Officials showed that Diffun lies within Nueva Vizcaya Province. It took more than two decades of the provinces to settle their jurisdictional claims of the area until it was finally resolved and created as a separate municipality. Hence, Diffun had obtained its identity as a municipality in 1950 by virtue of Executive Order No. 446, series of 1950 thru then President of the Republic of the Philippines, His Excellency, Elpidio Quirino.

Diffun is the gateway to the Province of Quirino. Majority of its people were comprises of farmers and diversity of professionals. Its main products are rice, corn, bananas and other root crops. With regards to education, it has 2 National High Schools and a College University.