The Senegal international heads to the KC Stadium - for an undisclosed fee - after spending two seasons at West Ham.
Diame, who worked under Tigers boss Steve Bruce when the pair were at Wigan, has made 79 appearances for the Hammers since joining them in the summer of 2012.
However, the France-born player has only started one game for Sam Allardyce’s men this season - the penalty shoot-out defeat to Sheffield United in the Capital One Cup last week.
Bruce has earmarked the recruitment of a midfielder to bolster his squad before the end of the transfer window and has also been linked with a move for Manchester United’s Tom Cleverley.
The former Rayo Vallecano player has moved further down the pecking order at Upton Park following the summer arrivals of fellow battle-hardened midfielders Alex Song and Cheikhou Kouyate.
And Bruce is pleased with his latest signing, saying: “I’m delighted to welcome Mo to the club.
"His experience, both at international level and in the Premier League, will be invaluable as we look to cement our place in the top-flight.”