Nano-composite (NCD) and multi-layered (MLD) diamond coatings deposited on cemented carbide tools are often applied in machining of non-ferrous materials. A critical issue for their wear behavior, especially in cutting processes in which interrupted repetitive loads are applied such as milling, is the fatigue strength. The latter parameter is significantly affected by the level of residual stresses in their diamond film structure. For investigating such an issue, untreated as well as annealed for 8h vacuum NCD and MLD coatings of the same thicknesses were produced. Inclined impact tests supported by appropriate FEA models were conducted for calculating the level of the residual stresses and for determining the critical impact force for the fatigue damage after 106 impacts. Moreover, the wear behavior of diamond coated inserts was investigating in milling aluminum foam. According to the attained results, the reduction of the residual stresses in the diamond film structure contributes to a significant increase of the fatigue strength and coated tool life for both examined cases. Moreover, due to the enhanced tribological properties of NCD films, an improved wear behavior is registered compared to the MLD ones, when both coatings possess the same level of residual stresses.