Diame only arrived at Upton Park last summer, with the midfielder linking up with the Hammers as a free agent.
The former Wigan man has been a revelation in the capital, with a number of commanding displays drawing admiring glances from the likes of Arsenal.
West Ham are reluctant to part with the 25-year-old enforcer, who is understood to have a buyout clause in his contract, and are doing all they can to tweak Diame's deal.
Allardyce, though, admits talks have been difficult, saying: "The owners have tried to renegotiate the contract, but they haven't been successful at the moment."
While eager to prevent Diame from slipping through the exits during the winter transfer window, Allardyce is also looking to add.
Former Arsenal, Manchester City and Chelsea striker Nicolas Anelka, who is currently on the books of Shanghai Shenhua, has been linked with a return to England, but Allardyce insists the Frenchman does not figure in his thoughts at present.
He said: "At the moment I am not in a position for Nicolas Anelka because my main priority is defenders.
"We have got Andy (Carroll) close to coming back and we have got Carlton Cole, (Marouane) Chamakh and we have also brought in Wellington."