The new innovation was engineered by Mindshare Invention, the WPP-owned agency's new creative thinking arm.
The brand will accompany contemporary furniture designers Ligne Roset, energy drink Red Bull, film studio Paramount Pictures and video content providers Hexus TV and Eurogamer as first on the platform, offering residents of PlayStation Home virtual clothing and virtual accessories.
Diesel will offer the latest men's and women's designer avatar clothing through the platform, with items ranging from free-of-charge to €1.50 (£1.30).
Ben Lukawski, worldwide partner at Mindshare, said: "PlayStation Home not only offers Diesel the chance to engage with its target audience in a new way but more importantly demonstrates how media can close the loop moving from a communication to a distribution channel -- in many ways a new high-water mark for retail brands."
PlayStation Home is a ground-breaking 3D social gaming community available on PlayStation 3 that allows users to interact, communicate and share gaming experiences together.
Within PlayStation Home, users can create and customise their own unique avatars and explore a real-time virtual community where they can communicate freely through text or voice chat.
PlayStation Home users will not only be able to enjoy variety of entertainment content such as mini-games, videos and special events along with their friends, but will also be able to create their own community, creating clubs with other PlayStation Home users who share the same interests.
Groups of users can launch directly into their favourite online games together.
Daniel Hill, home service manager at Sony Computer Entertainment Europe, said: "We are very excited to be bringing PlayStation Home to Europe and the PAL territories, offering users an interactive, social, gaming experience.
"PlayStation Home is unique to anything else in the gaming world and by partnering with both global and regional gaming and non gaming brands we are able to offer exciting and entertaining content that will enhance the PlayStation experience."