The pundit told Football League World (30 July) that the Whites could be a “great fit” for the former Huddersfield youngster, especially if Crysencio Summerville or Willy Gnonto leave.
According to Foot Mercato on 26 July Leeds are in the race for the 21-year-old alongside the Foxes, Burnley and Hull, as well as clubs in Europe.
Palmer said: “I know Premier League clubs are coming in, but you don’t want to be going to a club like Leicester, where you’re going to be sat on the bench and, eventually, in the January transfer window, you’re going to go out on loan. So you want to go to a club where you can do well.
“Burnley are going to be at the top end of the table, Leeds are going to be at the top end of the table after they just missed out on getting promotion last season. Hull you would expect to be in the top six, so any one of those football clubs would be a good move for him.
“There will be options for Diarra but it would be seen as a coup for any of those clubs if they manage to get his services.
“I’d like to see him at Leeds where I think he could have a really big impact and the fans would take to him with his exciting style of play.”