Operating under the existing Go Carz brand, the joining of forces creates a 650-strong fleet of licensed vehicles in Telford.
Go Carz said residents and businesses in Telford will benefit from increased capacity at peak times.
The deal also helps the local driver-partners by reducing the dead-mileage between bookings and creates more opportunities to earn, it added.
Linda and Nigel Horler, the founders of Diamond Cars, will oversee the transition to Go Carz and retire after 31 years in the business. Meanwhile, their son Dan will join the Go Carz management team.
Graham Hoof, regional director, said: “We are delighted that Diamond Cars and Go Carz are joining forces and look forward to working with Dan.
"We now have more cars all operating from one system which means passengers in Telford can expect an even better service.”
Passengers can still make a booking by using the existing telephone numbers for Diamond Cars. However, the Diamond Cars mobile app is no longer accepting bookings. Passengers should now use the Go Carz mobile app.