Diane was a California native who studied Drama at Santa Ana College before dropping out to study at the Neighborhood Playhouse in New York. After appearing in summer stock for several months, she got her first major stage role in the Broadway rock musical "Hair". As understudy to the lead, she gained attention by not removing any of her clothing. In 1970, Woody Allen cast her in his Broadway play "Play It Again, Sam", which had a successful run. It was during this time that she became involved with Woody and thereafter she appeared in a number of his films. The first one was the comedy Play It Again, Sam (1972) which was the screen adaption of the stage play. That same year Coppola cast her as Kay in the Oscar winning movie Godfather, The (1972) and she was on her way to stardom. Also stared in Godfather: Part II, The (1974), appeared with Woody in Sleeper (1973), Love and Death (1975) and so on.

Trying to break her typecasting, she became the tool of the terrorist in the film Little Drummer Girl, The (1984). To offset her lack of movie work, Diane began directing. She directed the documentary Heaven (1987), as well as some music videos. For television she directed an episode of the popular, but strange, "Twin Peaks" (1990). Diane received high marks for Unstrung Heroes (1995), her first major feature as a director.