Can You Solve this Ice Diamond Riddle? ft. Vsauce’s Michael Stevens

The water level will fall.

The greater density of the diamond will increase the overall density of the cube, reducing the proportion of the cube that is above the water. If the diamond is large enough (as a guesstimate, around 14-15% of the total mass of the icecube) the cube will sink as the combined average density of the ice and diamond will be higher than that of water. As the ice melts from the cube, the cube's density will eventually reach this point and it will sink to the bottom. Once it has, any more meltwater coming from the cube will have a higher density than it had as ice, and therefore less volume.

The water level will remain the same until the ice cube sinks, at which point it will begin to fall.