Diggins, 26, surged to the front on the final lap after attacking the final big climb, just as Dario Cologna did in the men's race.
The American narrowly held off Norway's Heidi Weng to finish in a time of 23:08.5 as Ragnhild Haga collected the final podium place.
Diggins knew the final climb would ultimately prove decisive and was delighted to stand at the top of the podium.
She said: "I watched the men's race and saw Dario [Cologna] win, and thought: 'I can do that'. I knew that final climb would be important.
"I tested it early in the race because I knew I had good skis and wanted to see how the draft affect was working.
"In the end, it all worked and I'm so happy to get this win."
Weng may have been just edged out 0.7 seconds but was still content with her performance heading into the Olympics in PyongCheng.
"It was a really good day," she said. "I'm happy with how I raced. I made a mistake up the final climb and then couldn't go with Diggins but I pushed hard all the way to the finish, but Diggins was the better skier."
Despite finishing second in Austria, Weng still holds the overall World Cup lead with 1346 points.
Norway’s Ingvild Oestberg is in second with 1147 points and Diggins moves up to third following her win at Seefeld.