We construct a Hereditarily Indecomposable Banach space X d with a Schauder basis (en) n∈N on which there exist strictly singular noncompact diagonal operators. Moreover, the space L diag (X d ) of diagonal operators with respect to the basis (en) n∈N contains an isomorphic copy of ℓ∞(N). Contents 1. Introduction 1 2. The mixed Tsirelson space T 0 = T [(A nj , 1 mj ) ∞ j=1 ] 6 3. Strictly singular non-compact operators on T 0 14 4. The HI space X d 17 5. A class of bounded diagonal operators on X d 26 6. The structure of the space L diag (X d ) 31 7. The finite block representability of J T0 in X d 33 References 45 2000 Mathematics Subject Classification. 46B28, 46B20, 46B03.