The 25-year-old midfielder has been the subject of much speculation during the January transfer window, after an impressive first six months at Upton Park.
Diame joined the Hammers on a free transfer from Wigan Athletic in the summer, and part of his contract in west London included a £3.5million release clause, which has already attracted attention from a number of rival Premier League clubs.
Gunners boss Arsene Wenger has been credited with an interest in bringing the Senegalese international to the Emirates Stadium, and even confirmed last week that he is a huge admirer of Diame's.
The African enforcer was named on the bench for West Ham's 5-1 defeat to Arsenal in the Premier League last night, but came on as a second-half substitute, prompting suggestions that Sam Allardyce was protecting the midfielder in the hope it would alleviate transfer rumours.
"I know there are people out there saying things about me, but I have spoken with the manager and told him that I want to stay here," confirmed Diame. "I know the club want to keep me too, so I will continue to give my best for them.
"I knew when I signed that West Ham were going to make their mark on the Premier League. Since I came here I am enjoying every game I play on the pitch. I think I made a good choice because I am very happy at this club."