Diniz was born in São Paulo to Abílio dos Santos Diniz, a prominent Brazilian businessman who owned the supermarket chain Pão de Açúcar and the Companhia Brasileira de Distribuição. He began karting at eighteen, supported financially by his father, and won the Two Hours of São Paulo. He moved into car racing in the Brazilian Formula Ford championship before joining British Formula 3 with West Surrey Racing in 1991, finishing eleventh. He moved to the Edenbridge Racing team for 1992, recording two podiums and finishing eighth.
Diniz entered Formula One with the Forti team in 1995 alongside Roberto Moreno, with his family's financial backing covering a substantial portion of the team's budget. Retired driver René Arnoux was employed as his coach. Despite scoring no championship points, Diniz finished enough races to establish a reputation for reliability, and his steady performances earned him a move to the more competitive Ligier team for 1996.
At the Argentine Grand Prix, Diniz's car caught fire at a pit stop after its fuel valve stuck open, producing one of the season's most dramatic images. He nonetheless scored his first career point with sixth place at the Spanish Grand Prix at Catalunya and added a second sixth-place finish at Monza, ending the season fifteenth with two points. He out-qualified teammate Olivier Panis at Hockenheim, demonstrating he was capable of holding his own when conditions suited.
Diniz joined Arrows for 1997 alongside reigning World Champion Damon Hill, with his sponsorship estimated at $13 million. He secured a seventh-place finish in Belgium having been running third before a pit stop problem dropped him back. In 1998, paired with Mika Salo, he scored a fifth-place finish in Belgium — his best career result — and finished fourteenth in the Drivers' Championship, tied on points with Salo. A contract dispute erupted at season's end; Diniz left for Sauber, which Arrows contested legally. The case was ultimately ruled in Diniz's favour by the Court of Appeal in February 2002.
At Sauber, partnered first with Jean Alesi and then Mika Salo, Diniz scored three points in 1999, including consecutive sixth-place finishes after the Canadian and French Grands Prix. In 1999 he was sent barrel-rolling at the European Grand Prix after being struck by Alexander Wurz's Benetton, suffering a bruised knee and shoulder. He scored no points in 2000 and left after the season ended.
Diniz purchased a 40 percent stake in the Prost team for $10 million, taking a management role. He departed in November 2001 after his relationship with Alain Prost deteriorated and negotiations over the remaining stake broke down. The Prost team folded shortly afterwards.
He founded the Formula Renault 2.0 Brazil Championship in 2002, which he ran through 2006. He subsequently became a partner in the Pão de Açúcar supermarket chain and established an organic produce and dairy farm. He founded Instituto Toca, a non-profit school and research initiative focused on sustainability, and serves on the board of Peninsula Participações and is a member of Food Tank, a non-profit organisation addressing sustainable food systems.
Diniz's Formula One career remains a study in the tensions between financial necessity and sporting merit in the 1990s paddock. Derided early on as a pay driver, he gradually earned respect for a competent and reliable driving style, out-qualifying higher-rated teammates on occasion and absorbing a legal battle with Tom Walkinshaw's Arrows organisation with an eventual legal victory. His post-career pivot toward agriculture, sustainability, and farm management represents one of the more distinctive transitions in Formula One alumni careers.