Diamond, the club's current executive director of sport, will begin his new role on February 1 as well as maintaining his current duties.
The club also expect to make announcements on two new signings and their future stadium plans in the coming weeks.
Co-owner Ian Blackhurst confirmed the new arrangement at a media conference on Tuesday afternoon, likening Diamond's new role to that formerly occupied with great success at Harlequins by Mark Evans.
"Brian (Kennedy, Blackhurst's fellow co-owner), Steve and I have discussed this for some time," Blackhurst said, in comments reported on the club's official website.
"The other example I can think of where the chief executive was involved whilst running rugby matters is Mark Evans at Harlequins. He set the foundations for where they are today.
"The strength of the management, both playing-wise and on the commercial side, is developed and we're very pleased that Steve is back at his spiritual home."
Diamond revealed the news on the new signings when he said: "We've worked over Christmas, but other clubs haven't so we can't make any announcements today.
"What we did pre-season was put so many people in place that we don't need radical changes now. Just two or three, maybe."
He added: "Every side I've been associated with - Saracens, Northampton, here - has operated within the salary cap. Money has been spent at the club on the infrastructure - a full-time doctor plus the improved facilities."
On that front, Blackhurst provided an update on the stadium situation and that regarding the club's Carrington training ground.
He said: "We own Edgeley Park - it's our ground.
"There's been a lot of speculation and coverage about the stadium near Barton Bridge - a fabulous facility - and we are in negotiations, but it has to be commercially right.
"The investment at Carrington in medical and training facilities for the players has proved worthwhile, and we propose to double the size of the building so that all the administration can be based here. Hopefully, this can be in place when the players return after the close season."
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