C/C composites with diamond addition are prepared, and a 1600 °C heat treatment is conducted to investigate the effects of diamond graphitization on the ablation resistance and thermal conductivity of the composites. With diamond content increasing, a higher degree of stress graphitization occurs to the surrounding pyrolytic carbon (PyC) due to the enhanced stress accumulation in the diamond stacking region during graphitization process. After heat treatment at 1600 °C, the single diamond/PyC interface is substituted by complex diamond/graphite and graphite/PyC interfaces which results in a more compact structure and enhanced interface strength. Benefiting from the optimized interface microstructure and reduced closed pores after diamond graphitization, higher thermal conductivities are achieved for C/C–diamond composites. The ablation performance of the composites is improved due to the better oxidation resistance of diamond particles, increased compactness of diamond stacking region, and optimized thermal properties of the composites.