Wolfsburg are preparing to decrease their wage bill in the January transfer window but Diego wants to sign a new contract.
The 13th-placed Bundesliga club have a first-team squad of 34 players and new general manager Klaus Allofs is ready to make cuts.
Wolfsburg only want players in their ranks who have a genuine chance of competing in the first team and will therefore look to trim some of their fringe elements.
Allofs told Suddeutsche Zeitung: "It's obvious we have too many players in the first-team squad at this point in time.
"I am unable to name the maximum amount of players in the first-team squad for the future."
One player who is not likely to leave in January is Diego and the 33-time Brazil international is keen to agree an extension on the remaining one-and-a-half years of his current contract.
He told Wolfsburger Allgemeine Zeitung newspaper: "Signing a new deal with Wolfsburg is one ambition of mine. It's something I am focussed on.
"But we have to ensure good form in the Bundesliga. If we succeed with that, I feel the future will definitely be bright."