According to his own work, he was born at Agyrium in Sicily (now called Agira). With one exception, antiquity affords no further information about his life and doings beyond in his work. Only Jerome, in his Chronicon under the "year of Abraham 1968" (49 BC), writes, "Diodorus of Sicily, a writer of Greek history, became illustrious". However, his English translator, Charles Henry Oldfather, remarks on the "striking coincidence" that one of only two known Greek inscriptions from Agyrium (Inscriptiones Graecae XIV, 588) is the tombstone of one "Diodorus, the son of Apollonius".
Diodorus' universal history, which he named Bibliotheca historica (Greek: Ἱστορικὴ Βιβλιοθήκη, "Historical Library"), was immense and consisted of 40 books, of which 1–5 and 11–20 survive: fragments of the lost books are preserved in Photius and the excerpts of Constantine Porphyrogenitus.
It was divided into three sections. The first six books treated the mythic history of the non-Hellenic and Hellenic tribes to the destruction of Troy and are geographical in theme, and describe the history and culture of Ancient Egypt (book I), of Mesopotamia, India, Scythia, and Arabia (II), of North Africa (III), and of Greece and Europe (IV–VI).
In the next section (books VII–XVII), he recounts the history of the world from the Trojan War down to the death of Alexander the Great. The last section (books XVII to the end) concerns the historical events from the successors of Alexander down to either 60 BC or the beginning of Julius Caesar's Gallic Wars. (The end has been lost, so it is unclear whether Diodorus reached the beginning of the Gallic War as he promised at the beginning of his work or, as evidence suggests, old and tired from his labours he stopped short at 60 BC.) He selected the name "Bibliotheca" in acknowledgment that he was assembling a composite work from many sources. Identified authors on whose works he drew include Hecataeus of Abdera, Ctesias of Cnidus, Ephorus, Theopompus, Hieronymus of Cardia, Duris of Samos, Diyllus, Philistus, Timaeus, Polybius, and Posidonius.
His account of gold mining in Nubia in eastern Egypt is one of the earliest extant texts on the topic, and describes in vivid detail the use of slave labour in terrible working conditions. Pappus of Alexandria wrote a Commentary on Diodorus's Analemma. The now lost Analemma applied geometrical constructions in a plane to solve some astronomy-related problems of spherical geometry. It contained, for example, a discussion of sundial theory.