diff --git a/docs/api-reference.md b/docs/api-reference.md
index 1dc3dfc..1307b6f 100644
--- a/docs/api-reference.md
+++ b/docs/api-reference.md
@@ -8,6 +8,7 @@
 
     atleast_nd
     cov
+    create_diagonal
     expand_dims
     kron
     sinc
diff --git a/src/array_api_extra/__init__.py b/src/array_api_extra/__init__.py
index 3049274..a69e939 100644
--- a/src/array_api_extra/__init__.py
+++ b/src/array_api_extra/__init__.py
@@ -1,7 +1,15 @@
 from __future__ import annotations
 
-from ._funcs import atleast_nd, cov, expand_dims, kron, sinc
+from ._funcs import atleast_nd, cov, create_diagonal, expand_dims, kron, sinc
 
 __version__ = "0.1.2.dev0"
 
-__all__ = ["__version__", "atleast_nd", "cov", "expand_dims", "kron", "sinc"]
+__all__ = [
+    "__version__",
+    "atleast_nd",
+    "cov",
+    "create_diagonal",
+    "expand_dims",
+    "kron",
+    "sinc",
+]
diff --git a/src/array_api_extra/_funcs.py b/src/array_api_extra/_funcs.py
index 459db63..ce80018 100644
--- a/src/array_api_extra/_funcs.py
+++ b/src/array_api_extra/_funcs.py
@@ -6,7 +6,7 @@
 if TYPE_CHECKING:
     from ._typing import Array, ModuleType
 
-__all__ = ["atleast_nd", "cov", "expand_dims", "kron", "sinc"]
+__all__ = ["atleast_nd", "cov", "create_diagonal", "expand_dims", "kron", "sinc"]
 
 
 def atleast_nd(x: Array, /, *, ndim: int, xp: ModuleType) -> Array:
@@ -140,6 +140,55 @@ def cov(m: Array, /, *, xp: ModuleType) -> Array:
     return xp.squeeze(c, axis=axes)
 
 
+def create_diagonal(x: Array, /, *, offset: int = 0, xp: ModuleType) -> Array:
+    """
+    Construct a diagonal array.
+
+    Parameters
+    ----------
+    x : array
+        A 1-D array
+    offset : int, optional
+        Offset from the leading diagonal (default is ``0``).
+        Use positive ints for diagonals above the leading diagonal,
+        and negative ints for diagonals below the leading diagonal.
+    xp : array_namespace
+        The standard-compatible namespace for `x`.
+
+    Returns
+    -------
+    res : array
+        A 2-D array with `x` on the diagonal (offset by `offset`).
+
+    Examples
+    --------
+    >>> import array_api_strict as xp
+    >>> import array_api_extra as xpx
+    >>> x = xp.asarray([2, 4, 8])
+
+    >>> xpx.create_diagonal(x, xp=xp)
+    Array([[2, 0, 0],
+           [0, 4, 0],
+           [0, 0, 8]], dtype=array_api_strict.int64)
+
+    >>> xpx.create_diagonal(x, offset=-2, xp=xp)
+    Array([[0, 0, 0, 0, 0],
+           [0, 0, 0, 0, 0],
+           [2, 0, 0, 0, 0],
+           [0, 4, 0, 0, 0],
+           [0, 0, 8, 0, 0]], dtype=array_api_strict.int64)
+
+    """
+    if x.ndim != 1:
+        err_msg = "`x` must be 1-dimensional."
+        raise ValueError(err_msg)
+    n = x.shape[0] + abs(offset)
+    diag = xp.zeros(n**2, dtype=x.dtype)
+    i = offset if offset >= 0 else abs(offset) * n
+    diag[i : min(n * (n - offset), diag.shape[0]) : n + 1] = x
+    return xp.reshape(diag, (n, n))
+
+
 def _mean(
     x: Array,
     /,
diff --git a/tests/test_funcs.py b/tests/test_funcs.py
index 30e71eb..a8db987 100644
--- a/tests/test_funcs.py
+++ b/tests/test_funcs.py
@@ -6,10 +6,11 @@
 
 # array-api-strict#6
 import array_api_strict as xp  # type: ignore[import-untyped]
+import numpy as np
 import pytest
 from numpy.testing import assert_allclose, assert_array_equal, assert_equal
 
-from array_api_extra import atleast_nd, cov, expand_dims, kron, sinc
+from array_api_extra import atleast_nd, cov, create_diagonal, expand_dims, kron, sinc
 
 if TYPE_CHECKING:
     Array = Any  # To be changed to a Protocol later (see array-api#589)
@@ -112,6 +113,42 @@ def test_combination(self):
         assert_allclose(cov(y, xp=xp), xp.asarray(2.144133), rtol=1e-6)
 
 
+class TestCreateDiagonal:
+    def test_1d(self):
+        # from np.diag tests
+        vals = 100 * xp.arange(5, dtype=xp.float64)
+        b = xp.zeros((5, 5))
+        for k in range(5):
+            b[k, k] = vals[k]
+        assert_array_equal(create_diagonal(vals, xp=xp), b)
+        b = xp.zeros((7, 7))
+        c = xp.asarray(b, copy=True)
+        for k in range(5):
+            b[k, k + 2] = vals[k]
+            c[k + 2, k] = vals[k]
+        assert_array_equal(create_diagonal(vals, offset=2, xp=xp), b)
+        assert_array_equal(create_diagonal(vals, offset=-2, xp=xp), c)
+
+    @pytest.mark.parametrize("n", range(1, 10))
+    @pytest.mark.parametrize("offset", range(1, 10))
+    def test_create_diagonal(self, n, offset):
+        # from scipy._lib tests
+        rng = np.random.default_rng(2347823)
+        one = xp.asarray(1.0)
+        x = rng.random(n)
+        A = create_diagonal(xp.asarray(x, dtype=one.dtype), offset=offset, xp=xp)
+        B = xp.asarray(np.diag(x, offset), dtype=one.dtype)
+        assert_array_equal(A, B)
+
+    def test_0d(self):
+        with pytest.raises(ValueError, match="1-dimensional"):
+            create_diagonal(xp.asarray(1), xp=xp)
+
+    def test_2d(self):
+        with pytest.raises(ValueError, match="1-dimensional"):
+            create_diagonal(xp.asarray([[1]]), xp=xp)
+
+
 class TestKron:
     def test_basic(self):
         # Using 0-dimensional array