The study is devoted to structure and mechanical properties of a diamond composite used for manufacturing of cutting tools applied in a wide range of technological fields. The sample tools were fabricated by cold-pressing technology followed by hot-pressing in vacuum of the 51Fe–32Cu–9Ni–8Sn matrix mixture with diamond bits, both in absence and presence of nano-VN additives. It was demonstrated that without VN addition, the diamond–matrix interface contained voids and discontinuities. Nanodispersed VN added to the matrix resulted in the formation of a more fine-grained structure consisting of solid solutions composed of iron, copper, nickel, vanadium and tin in different ratios and the formation of a tight diamond–matrix zone with no visible voids, discontinuities and other defects. Optimal concentrations of VN in the CDM matrix were found achieving the maximum values of nanohardness H = 7.8 GPa, elastic modulus E = 213 GPa, resistance to elastic deformation expressed by ratio H/E = 0.0366, plastic deformation resistance H3/E2 = 10.46 MPa, ultimate flexural strength Rbm = 1110 MPa, and compressive strength Rcm = 1410 MPa. As-prepared Fe–Cu–Ni–Sn–VN composites with enhanced physical and mechanical properties are suitable for cutting tools of increased durability and improved performance.