The Senegal international had been linked with a number of clubs, due to a release clause written into his contract when it was penned during the summer.
The likes of Tottenham, Arsenal and Liverpool were all reportedly interested in Diame, but Allardyce said no club activated the release clause and reckons agents are to blame for all of the deadline-day rumours surrounding the midfielder.
When asked if a bid had been made, Allardyce's bullish reply was: "Agent speak. It is agents trying to create a frenzy by seeing if they can make something out of nothing happen. By the fact nobody has triggered Mo Diame's clause is the reason why he is still here."
The former Blackburn boss said it was impossible to relax during transfer deadline day until 11:05pm, when he could sit with a glass of brandy, knowing he still had Diame in his squad.
Allardyce admitted it was a relief to still have Diame at the club, after the 24-year-old had impressed sinc e completing a free transfer from Wigan before the start of the season.
"It is a massive relief to me," he said. "It wouldn't have mattered how much money we got for him yesterday or the day before. It would have been a crushing blow because we couldn't have done anything with the money we might have got for him - certainly not to the extent of replacing a player at that late stage with the quality you are looking for.
"I am really pleased he is still with us."
With the stipulation in Diame's contract, there is always a worry that a club could return to secure his services at the end of the current campaign.
And Allardyce is aware there is nothing West Ham can do about it.
"No, we have already tried that," Allardyce said, when asked if Diame's contract could be re-negotiated to remove the clause.
"At the end of the day we would wait to see what happens between now and the end of the season. Wait and see where we are and then take a v iew on everything and everybody at the club at that stage."
Diame was one of the Premier League's form players until he suffered a hamstring tear in the 3-2 defeat to Liverpool in December.
That ruled the former Rayo Vallecano midfielder out for over a month, but he is now back in first-team action and Allardyce is hoping he can continue to improve his game to help pull the Hammers clear of trouble.
He only joined us in the summer from Wigan and I think he has now got to continue his growth as a player," he said.
"He has got to continue extracting more and more out of his game because there's still a lot more to come. He's got to get better than he already is.
"You'll never see the best of him yet because he's only 24. He's a really good player but he'll get even better as time goes on, as long as he steers clear of injuries that is.
"He's not at the peak of his career because he's still learning. We see a very talented young man who has got to continue to grow and learn to use his abilities to greater effect."
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