Snapped up on a temporary basis from West Ham back in August, Diangana has been integral to the Baggies' rise to the top of the Championship.
The Hammers have the option to recall the winger from his loan at The Hawthorns this month – with the Premier League outfit having until January 27 to make a decision.
But with Albion eager to keep him – and with other clubs interested in the 21-year-old – West Ham want an increase to the initial loan fee the Baggies paid to sign Diangana in the summer.
Albion are willing to increase the amount they paid – with a deal for Diangana to remain at the club understood to be close to completion.
And as part of the negotiations, the two clubs are also discussing a further £3million deal that would see the winger remain on loan at The Hawthorns next season as well.
As well as keeping Diangana, head coach Slaven Bilic is also keen to add another forward player to his ranks this month.
Speaking on Thursday, the head coach confirmed Dinamo Zagreb winger Mislav Oršić is amongst the players he is interested in.
Huddersfield's Karlan Grant is another player believed to be under consideration.