The Sale scrum-half - who turns 30 at the end of the month - has been left out of Wales' warm-up games and looks certain to be omitted from their final 30-man squad, which Gatland will announce next Monday.
Wales attack coach Rob Howley was quoted last week as saying Peel was still suffering from a ruptured finger, yet Diamond revealed his player had been back in training since the start of June.
Mike Phillips looks certain to start as Gatland's first-choice number nine in New Zealand and youngsters Tavis Knoyle and Lloyd Williams are seemingly behind him, leaving Peel way down the pecking order.
Yet Diamond insisted the 2005 British and Irish Lion was worthy of selection and claimed a lack of communication from the Wales coaches has not helped his cause.
"We want Dwayne to play in the World Cup, and I think Wales should have another look at their selection," said Sale's executive director of sport.
"Yes, he did have a finger injury but he's not missed one training session with us since June 6 and he was declared fit to go into contact in July.
"To be perfectly honest the Wales management haven't spoken to me about Dwayne Peel in the six months that I've been at the club.
"Commonsense tells us that they're not going to pick him, which is fantastic for Sale but not fantastic for him.
"He's nearly 30 and he wants to go to the World Cup.
"When I joined the club that was made perfectly clear - we would get him fit and get him in a mindset to go to the World Cup for six, eight, 10 weeks and then come back to us for the next two to three years.
"He's a great guy, a fantastic player and we're very supportive of him.
"I just think it's a lack of communication but certainly not from us.
"We've tried to speak to Wales about his situation but ultimately they haven't played ball with any of the Premiership sides with their players."
Peel's deal with Sale meant he was unavailable for Wales' build-up until August 4.
And Gatland admitted the former Scarlets man is not high up in his thoughts.
"Dwayne has been unlucky in the last couple of years in that every time we've had him involved, his body has not always been 100 per cent," said Gatland as he prepares for Saturday's final World Cup warm-up match against Argentina.
"There have never been a number of occasions, which have been well-documented, when he hasn't been available to us.
"He wasn't available to us until August 4, which really hampered his opportunities.
"It has made it difficult. He hadn't been 100 per cent pre-season, he had a couple of injuries that had been an issue.
"We have been pleased with the progress Mike Phillips has made in the first couple of games, and the two youngsters - Tavis Knoyle and Lloyd Williams - are really putting pressure on him.
"They are probably two of the fittest players we have in the squad.
"We are confident in picking Tavis, and we've also been incredibly impressed by the way Lloyd Williams has come on."
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