Lyrically, the song makes mention of the mythical town of Diddy Wah Diddy. It was not unusual in the early part of the 20th century for African Americans in the southern states (particularly in Florida) to speak of various mythical cities and countries such as Beluthahatchie, Heaven, Diddy Wah Diddy and West Hell as if they were real. Of all the imaginary locations that were in common usage at the time, folklorist and ethnomusicologist Benjamin Albert Botkin has noted that Diddy Wah Diddy was "the largest and best known of the Negro mythical places." It was commonly believed that in Diddy Wah Diddy food could be found in abundance, the townsfolk did not have to work, and people and animals had no concerns. Dixon and McDaniel's song is sung from the point of view of a man whose lover lives in this mythical location, as evidenced by such lines as...
She loves her man, just is a pity
Crazy 'bout my gal in Diddy Wah Diddy
Ain't no town, and it ain't no city
But oh, how they love in Diddy Wah Diddy
The song is often confused with Blind Blake's similarly titled 1928 song, "Diddie Wa Diddie", which was also covered by various bands and artists mostly under the name "Diddy Wah Diddy".
The first known cover of the song was by the Colorado based rock band The Astronauts, on their RCA album The Astronauts Orbit Campus, in 1964.
Around the same time, The Remains, from Boston, released a garage rock version of the song which became a hit in the East Coast charts.
The Sonics covered the song as a garage rock version around 1966, and it was included in the 1991 release of Maintaining My Cool and the 2004 Sundazed reissue of the album Introducing the Sonics.
"Diddy Wah Diddy" is mentioned by name on the cover of the first issue of Robert Crumb's Zap Comix, where a woman asks Mr. Natural for the meaning of the song's title.
The version by Ty Segall Band is featured on the soundtrack of Grand Theft Auto V on Vinewood Boulevard Radio.
In "Mad Dogs and Servicemen", a third season episode of M*A*S*H, Radar refers to "Diddy Wah Diddy" as one of his favorite records. This is an anachronism, as the Korean War ended in 1953 and "Diddy Wah Diddy" was not recorded until 1955.