The company took its name from Van Diemen's Land, the former colonial name for Tasmania, Australia, where co-founder Ross Ambrose was born. Ralph Firman Sr. managed the engineering side of the business, and both founders' children went on to racing careers: Marcos Ambrose, Ralph Firman Jr., and Natasha Firman all competed professionally in later years.
The first Van Diemen car was the FA73, which Derek Lawrence drove to victory in the BRDC Formula Ford 1600 championship in 1973. The marque took early wins in Scottish and BRSCC championships and attracted a young Brazilian driver, Chico Serra, who won the 1977 BRSCC title and the Formula Ford Festival in a Van Diemen. The company briefly entered Formula Three in 1976–77 after acquiring Group Racing Developments, a Formula Three chassis producer, and a long-term partnership with Duckhams Oil began in 1977 and ran until 2002.
The early 1980s established Van Diemen as the pre-eminent formula car constructor in the junior categories. In 1980, Roberto Moreno and Raul Boesel won 13 of 14 races in the BRSCC Formula Ford 1600 championship driving Van Diemens. Moreno won the Formula Ford Festival that year. The following season, Tommy Byrne won the Festival and the European and British Formula Ford 2000 titles in Van Diemens. Most significantly, Ayrton Senna made his European racing debut in 1981 in Van Diemen chassis, taking the BRSCC and RAC Formula Ford 1600 titles, then in 1982 won both the British and European Formula Ford 2000 championships in Van Diemens. Eddie Irvine won the Formula Ford Festival for Van Diemen's works team in 1987; the marque won the prestigious event four consecutive times between 1986 and 1989.
Van Diemen entered Formula Renault in 1989, with Neil Riddiford winning the first British Formula Renault Championship that year. Jason Plato won the inaugural Formula Renault Eurocup in a Duckhams Van Diemen factory entry. The company was also contracted to supply all cars for the Formula Vauxhall Junior spec series from 1991, with the inaugural champion being future IndyCar driver Dario Franchitti. Van Diemen won the British Formula Ford championship five times through the 1990s and the Formula Ford Festival seven times in the same decade. The marque expanded into North America; its cars won the first two official USF2000 championships in 1995 and 1996, and a Van Diemen briefly re-entered Formula Three in 1992 with cars built by Precision Composites for the Japanese, German, and French championships.
In 2002, Van Diemen International was purchased by Don Panoz and incorporated into his Élan Motorsport Technologies group based in Braselton, Georgia. Factory team operations ceased at the point of acquisition. Under Élan ownership, Van Diemen became more active in the United States, supplying cars for Formula Ireland, the Star Mazda championship, and the IMSA Lites series. The last Van Diemen Formula Ford car was designed in 2008. The USF2000 series was revived in 2010 using Élan Van Diemen chassis; however, all new cars from that point carried the Élan name rather than Van Diemen, gradually ending the marque's identity as a distinct brand. Following the demise of Van Diemen as an active manufacturer, Ralph Firman Sr. founded a successor constructor, Ralph Firman Racing.
Van Diemen's significance to motorsport lies above all in its role as the nursery car for a generation of Formula One drivers. Ayrton Senna's early title haul in Van Diemens in 1981–82 remains the most celebrated chapter in the marque's history, but the list of drivers who passed through its chassis also includes Jenson Button, who won the 1998 Formula Ford Festival, and numerous CART and IndyCar alumni. At its peak, Van Diemen's proximity to Snetterton and its output of reliable, well-supported chassis made it the default choice for teams competing in British and European Formula Ford for over twenty years.