Abstract: The diamond industry is a vital part of the jewelry industry. In the second half of 2014 and especially in 2015, the diamond industry suffered the most intense recession since the 2008 financial crisis. Through the analysis of diamond industry reports, company annual reports, and news reports, the authors reviewed the current status of the global diamond industry, focused on the reasons for and results of this recession, and pointed out several prospective challenges faced by the industry. Obviously, the most crucial and urgent problem facing the industry is the softened demand for diamond jewelry. The available information suggests that because of the sudden improvement in the diamond industry in the second half of 2013, major rough diamond producers increased sales and prices of rough diamonds while mid-sector companies speculated heavily by buying them. However, the demand for diamond jewelry in emerging markets, particularly in Greater China Area, has declined unexpectedly since the second half of 2014. The sharp decrease in demand for polished diamonds in emerging markets and tight liquidity for the mid-sector further depressed the prices and profitability of polished stones. In turn, sales and prices of rough stones decreased dramatically, and major producers were left with large excess inventory. As a result, a vicious circle was created. In 2015, the diamond industry suffered a ripple effect from the decline in consumer demand for diamond jewelry that began in 2014. In the meantime, structural problems in the global diamond industry enlarged and deepened this recession. The diamond industry now faces several new challenges. First, the rough diamond distribution system is undergoing structural change and producers are moving away from strategic coordination, which will cause instability in the industry. Second, mid-market companies with underlying structural problems including declining profitability and increasing financial risk are not robust enough to cushion against fiercer competition in the industry and short-term fluctuations in the retail market, and thus will likely undergo structural reform. Last but not least, the diamond industry has lacked investment in generic marketing for too long.