After postdoctoral studies with Orville L. Chapman at the University of California, Los Angeles (UCLA) and habilitation at the Max Planck Institute for Medical Research in Heidelberg, he became Full Professor of Organic and Bioorganic Chemistry at UCLA in 1989. In 1992 he was appointed Professor of Organic Chemistry at ETH Zurich. He retired on 31 July 2017, and remained a research-active professor at ETH Zurich. On 16 March 2019, the German Chemical Society (Gesellschaft Deutscher Chemiker, GDCh) bestowed him with their highest recognition, Honorary Membership.
Diederich died on 23 September 2020 after a battle with cancer.
His research interests cover a wide range of topics: 
* Molecular recognition in chemistry and biology. 
* Modern medicinal chemistry: molecular recognition studies with biological receptors and X-ray structure-based design of nonpeptidic enzyme inhibitors. Examples of targets: plasmepsin II, IspE and IspF in the non-mevalonate pathway of isoprenoid biosynthesis (malaria); t-RNA guanine transglycosylase (shigellosis); trypanothione reductase (African sleeping sickness). 
* Supramolecular nanosystems and nano-patterned surfaces.
* Advanced materials based on carbon-rich acetylenic molecular architecture: new organic super-acceptors and their inter- and intramolecular charge-transfer complexes, opto-electronic materials for molecular electronic circuitry, chiral macrocyclic and acyclic alleno-acetylenes, amplification of chirality and its transfer from the molecular to the macroscopic scale.