The 28-year-old will leave Aston Gate this summer, while Middlesbrough have been tracking the striker for months.
Despite Diedhiou being available on a free agent, it’s understood the forward would have to lower his wage demands to initiate a move to Teesside.
Boro boss Neil Warnock is believed to be keeping an eye on the situation, while also assessing other targets this summer.
It’s been reported that Diedhiou also has strong interest from abroad.
The striker finished as City’s top scorer during the 2019/20 and 2020/21 campaigns, scoring 13 and 12 goals respectively.
Diedhiou’s performances dropped off in the second half of this season, though, and the frontman hasn’t scored since his brace against Boro in February.
It’s believed the striker was offered a new contract at Bristol City, yet new terms couldn’t be agreed.
After being released by the club, Diedhiou took to Twitter, posting: “I would like to thank every single person who supports the BCFC. 4 years 4 incredible years with the team who helped me to live my dreams and play in England. It’s been a big pleasure and some great memories from the first year but not the end I wanted.
“Very disappointed and not the season we wanted but I will never forget the family. Time to go but nothing gonna change for me the love for Bristol City. Massive thanks to everyone from the man who lived in Knowle.”