In this explorative study, a diagnostic test on diffusion and osmosis (DTDO) was developed and used to assess pre-degree students' conceptual understanding and application of diffusion and osmosis in biology. The 25-item DTDO is a two-tier test--adapted from Odom and Barrow's (1995) Diffusion Osmosis Diagnostic Test (DODT)--developed and validated with the Nigerian curricula of both senior secondary school and university pre-degree programme. Cronbach alpha was used to estimate the internal consistency of the items. The study adopted descriptive survey design. Homogenous clustered random sampling technique was used to get a sample size of 806 pre-degree students (476 biology majors and 330 non-biology majors) in a federal university in Nigeria. Data collected were analyzed using descriptive and inferential statistics. The findings revealed that only 27.02% of the students have conceptual understanding and application of diffusion and osmosis. Meanwhile, the students showed highest understanding and application in the concept of kinetic energy of matter (40.1%) and least were concepts of concentration and tonicity (12.8%) compared to other allied concepts. It is evident that both genders had a fairly similar conceptual understanding and application of diffusion and osmosis. Biology majors had a slightly higher conceptual understanding and application than non-biology majors, the difference is however not significant. It is recommended that prior understanding and application of diffusion and osmosis should not be assumed at tertiary level and that teaching of the concepts should be enhanced using contemporary approaches and technology for all categories of students.