What is Diversity Jurisdiction?

Legal Definition
In the law of the United States, diversity jurisdiction is a form of subject-matter jurisdiction in civil procedure in which a United States district court in the federal judiciary has the power to hear a civil case where the persons that are parties are "diverse" in citizenship, which generally indicates that they are citizens of different states or non-U.S. citizens. (Corporations, as legal persons, may also be included.) Diversity jurisdiction and federal-question jurisdiction (jurisdiction over issues arising under federal law) constitute the two primary categories of subject matter jurisdiction in U.S. federal courts.

The United States Constitution, in Article III, § 2, gives the Congress the power to permit federal courts to hear diversity cases through legislation authorizing such jurisdiction. The provision was included because the Framers of the Constitution were concerned that when a case is filed in one state, and it involves parties from that state and another state, the state court might be biased toward the party from that state. Congress first exercised that power and granted federal trial circuit courts diversity jurisdiction in the Judiciary Act of 1789. Diversity jurisdiction is currently codified at 28 U.S.C. § 1332.

In 1969, the American Law Institute explained in a 587-page analysis of the subject that diversity is the "most controversial" type of federal jurisdiction, because it "lays bare fundamental issues regarding the nature and operation of our federal union."
-- Wikipedia
Legal Definition
A federal court's power to hear any case where the amount in controversy exceeds $75,000 and no plaintiff shares a state of citizenship with any defendant. See 28 U.S.C. § 1332(a). Diversity jurisdiction is one of the two main types of subject-matter jurisdiction in federal court (the other being federal question jurisdiction).

See Subject-matter jurisdiction.