The rapper's business ventures including Ciroc Vodka, Sean John and Enyce clothing, Blue Flame marketing and record label Bad Boy Records have helped amass his personal fortune.
His net worth is likely to rise much higher next year when he launches his own cable channel Revolt.
Jay-Z finishes in second place with $460 million, thanks to his recent earnings from his Watch the Throne tour, Live Nation deal, 40/40 club chain and stake in the New Jersey Nets among others.
The Forbes top five is completed by Dr Dre ($270 million), Birdman ($125 million) and 50 Cent ($110 million).
Dr Dre's earnings have been boosted recently with the sale of his Beats Electronics to HTC last year for $300 million.
Jay-Z beat Diddy in last year's Forbes list which detailed hip-hop's highest earners from August 2010 to August 2011.
Dr Dre is rumoured to be planning a tour with Snoop Dogg and the hologram version of Tupac Shakur, which was displayed for the first time at the Coachella Festival at the weekend.
Diddy's New York home was recently burgled by a 30-year-old fan, who spent nearly 24 hours inside the property.
Watch the video for 'Coming Home' by Diddy-Dirty Money below: