Diamond willow is willow distinctively shaped as the result of an attack by a fungus (Valsa sordida, and possibly others), which has resulted in a diamonding effect occurring in the wood of the shrub or tree as the tree forms cankers, or diamonds (elongated ovals with pointed ends), in response to the infection. This is the most likely, but not necessarily definitive, cause of the diamonding in willows.

The diamonding is usually found with a branch at its center or is found in the Y of a tree. Diamonding in willow does not seem to be specific to an area that willows grow in, and where one bunch of willow will have diamonds, the next clump of willows may have none at all. Although diamond willow is often thought of as being a northern phenomenon of the boreal forest, there is mention of diamond willow growing as far south as Missouri.

The tree grows diamond-shaped cankers in response to the fungus. The cankers seem to result from the tree growing away from the site of attack. By growing away from the fungus, new layers of growth occur further and further away from the site of the fungal attack. Thus the affected area gets larger and deeper. If the tree has been affected in several places close together, then the diamonds run into each other. The shape of the diamonds seems to vary from one clump of willow to the next, although there may be some general tendencies within a single species. Some stems will form long narrow diamonds; others will be short and wide.