In order to make the most of energy and resources and obtain mortars with beneficial properties, diatomite is employed in this paper as a partial replacement of natural hydraulic lime (NHL) and masonry waste as aggregate to prepare mortars with different water-binder ratios (w/b). Tests are conducted after 14, 28 and 90 d of curing, namely, compressive and flexural strength, microstructure, mass variation, apparent density, water absorption, sulfate resistance and, additionally, percentage strength and pozzolanic indexes are used to characterise the role of the pozzolanic effect in improving the mortars' strength. The results show that the introduction of diatomite improves the strength of mortars. The enhancement of strength is attributed to the pozzolanic reaction between diatomite and calcium hydroxide in NHL, which proceeds noticeably after 14 d of curing. The diatomite replacement percentage and w/b influenced apparent density, water absorption and strength of mortars; high density and low water absorption are propitious to strength enhancement. Sulfate resistance of mortars prepared with diatomite incorporation is improved greatly. The percentage strength and pozzolanic indexes of mortars indicate that diatomite has a significant pozzolanic effect and is a good active mineral admixture for NHL mortars.