Diamond is widely used in high-power electronic devices, optical components, biomedical tools, micro-electromechanical systems (MEMS) and many other fields due to its excellent electrical, physical and chemical properties such as ultra-wide bandgap, high thermal conductivity, excellent hardness and chemical stability. However, although these properties give diamond significant advantages in applications, they bring huge challenges to its processing. Among many processing techniques, plasma etching has become a key method for diamond micromachining due to its characteristics of high precision, controllability and low damage. This study reviews the latest progress in diamond plasma etching techniques focusing on analyzing the characteristics of oxygen plasma, hydrogen plasma and mixed gas plasma. Oxygen is the main gas for diamond plasma etching. Oxygen plasma etching enables to achieve rapid removal of diamond by reacting with the diamond surface to generate volatile gaseous compounds (such as CO and CO2). However, preferential etching by oxygen plasma at defects is likely to cause an increase in surface roughness, which limits its application in scenarios that require smooth surfaces. In contrast, hydrogen plasma etching has significant advantages in reducing surface roughness and achieving surface planarization. Hydrogen plasma can dramatically reduce the roughness of diamond surfaces by generating and desorbing hydrocarbons. Hydrogen-oxygen mixed plasma etching can combine the etching effect of oxygen and the surface reconstruction mechanism of hydrogen, which has been widely used in diamond pretreatment. Other mixed gas plasmas (such as CF4/O2 and Ar/O2) are also extensively employed in diamond microstructure processing. The CF4/O2 mixed gas not only significantly increases the etching rate, but also reduces the surface roughness by reducing the micro-masking effect. The Ar/O2 mixed gas balances the chemical etching effect of oxygen through the physical sputtering of argon gas, reducing the preferential etching of defective areas and further improving surface smoothness. These characteristics make mixed gas etching excellent in processing complex microstructures. In this review, parameters that affect etching results, including plasma power, gas pressure, temperature, and gas composition, are also analyzed. These parameters determine the etch rate, surface roughness and anisotropy. Specifically, increasing plasma power often increases the energy of reactive particles, thereby increasing the etching rate. In addition, innovative processes such as laser-induced plasma-assisted etching (LIPAA) and metal-catalyzed plasma etching are also explored. LIPAA reduces the energy threshold of traditional laser etching and improves material removal efficiency through the synergistic effects of laser ablation and plasma chemical reactions. Metal-catalyzed plasma etching uses transition metals such as iron (Fe) or nickel (Ni) to achieve high-precision patterning through local graphitization at high temperature, and can process complex microstructures without traditional masks. This paper provides a reference for optimizing diamond processing by summarizing the effects of different gases and process parameters on etching effects. Future research directions include the development of new plasma gases, combination with other processing techniques, and improvement of process scale capabilities to further expand the industrial application of plasma etching. These advances will open up new prospects for diamond applications in high-power electronics, advanced optics and next-generation MEMS technology.