Diaz was raised along with her elder sister in New York City's lower east side by parents of Puerto Rican descent. She became interested in acting at the Henry Street Settlement and subsequently attended the Professional Performing Arts School in Manhattan.

She recently completed a degree in Film Production at New York University's Tisch School of the Arts, and has made numerous off-Broadway and workshop appearances including Medea at the Bullet Space, the Hip Hop Theater Festival at P.S. 122, and the New York City Fringe Festival.

She started her film career with a supporting role in Tom DiCillo's Double Whammy (2001) and later landed roles in Jim McKay and Hannah Weyer's From an Objective Point of View and Peter Sollett's Raising Victor Vargas (both 2002). Television work at this time included an episode of Law & Order and a pilot for Queens Supreme (both 2003).

Her breakthrough roles came as Blanca in Catherine Hardwicke's Lords of Dogtown (2005) and as Laurie in Dito Montiel's A Guide to Recognizing Your Saints (2006) which earned her a Independent Spirit Awards nomination for Best Supporting Female. She was subsequently cast by Jamie Babbit in the lead role of Anna in Itty Bitty Titty Committee (2007) as well as a role in Hamlet 2 and Be Kind Rewind in 2008. Diaz is currently working on a 2009 drama, Identity, which is in pre-production.

She appears in the Mary J. Blige video "We Got Hood Love" which debuted on May 10, 2010.