Upon commissioning Diomede joined the 5th Light Cruiser Squadron on the China Station in 1922. In 1925 she was transferred to the New Zealand Division of the Royal Navy at Devonport where she served until 1935, apart from a refit in 1929-1930. In 1931 she rendered assistance to the town of Napier, New Zealand after the devastating Hawkes Bay earthquake, supplying medical personnel, equipment, guards and firemen, along with her sister ship Dunedin. Afterwards Diomede escorted the beach-damaged sloop Veronica to Auckland. The Executive officer at the time (1930-1933) was Commander, later Admiral Victor Crutchley, who was to later become entwined with the Pacific Campaign of World War II – JCs Royal New Zealand Navy Ships and New Zealand Defence, Also other World Defence Updates

Upon the notification that the two cruisers of the New Zealand Division were to be replaced by Leander-class cruisers, in 1935 Diomede started her voyage home to Britain to be paid off into the reserve. En route the Abyssinian Crisis broke out and she was diverted to the 4th Light Cruiser Squadron, part of the East Indies Station based at Aden for possible action against the Italians. Upon relief by the cruiser Achilles on 31 March 1936 she was paid off and spent the next three years in the reserve fleet or as a troop ship.