From a serer father and a manjaque mother originating in Guinea-Bissau, Diagne was born in Gorée, Senegal and studied in France before joining the French customs service in 1892. He served in Dahomey (modern day Benin), French Congo (now Republic of the Congo), Réunion, Madagascar, and French Guiana. In September 1899, while in Réunion, Diagne became a freemason, joining a lodge affiliated with the Grand Orient de France.
Diagne was elected to the French national parliament in 1914 as Senegal's representative. He was reelected several times, serving until his death in 1934. From 1914 to 1917 he caucused with the Marxist-socialist Section française de l'Internationale ouvrière, forerunner of the French Socialist Party, before affiliating with the Independents led by Georges Mandel. In 1916 Diagne convinced the French parliament to approve a law (Loi "Blaise Diagne") granting full citizenship to all residents of the so-called Four Communes in Senegal: Dakar, Gorée, Saint-Louis, and Rufisque. This measure constituted a considerable element of the French colonial policy of a "civilizing mission" (mission civilisatrice). He was a leading recruiter for the French army during World War I, when thousands of black West Africans fought on the Western Front for France.
After the war, Diagne embarked on an administrative career in addition to his responsibilities as a parliamentary deputy. From October 1918 to January 1920 he served as Commissioner General of the Ministry of Colonies with supervision of military personnel from the colonies and workers from France's African possessions. He represented France in the International Labor Office, the secretariat of the International Labor Organization, in 1930. From January 1931 to February 1932 he was Under-Secretary of State for the Colonies, a junior level cabinet position. From 1920 to 1934 he served as mayor of Dakar.
He died in Cambo-les-Bains in 1934.
It is alleged that he was not buried in the Muslim cemetery of Soumbedioune in Dakar because of his freemasonry. However, a large boulevard (Avenue Blaise Diagne) and a high school (Lycée Blaise Diagne) in Dakar were named in his honor, as well as Senegal's new international airport, Blaise Diagne Airport in Ndiass, 52 kilometers outside of Dakar.
His son Raoul was the first black to play professional soccer in France and had great success playing for Racing Club de France in the late 1930s, winning the French title in 1936 and the French cup in 1936, 1939, and 1940.