Diddy earned $130 million in the past 12 months, of which $70 million came from selling a one-third stake in his Sean John clothing line.
Diddy -- whose real name is Sean Combs and earlier in his career was known as Puff Daddy -- is estimated by Forbes to be worth a total of $820 million even though he has released little music in the past decade.
But he has pursued a variety of business interests and last year headlined a North American arena tour with other artists on his Bad Boy Records label.
Beyonce came second at $105 million after her lucrative "Formation" tour, an elaborately staged set of performances that followed her "Lemonade" album.
Beyonce, who is expecting twins, is estimated to be worth $1 billion with her husband, rap mogul Jay Z, who himself was number 55 on the list.
"Harry Potter" author J.K. Rowling, who published a series of e-books last year, came in third at $95 million, making her the highest-paid celebrity outside of music.
She narrowly edged out Canadian hip-hop star Drake, Portuguese footballer Cristiano Ronaldo and Canadian R&B sensation The Weeknd.
Guns N' Roses entered the list at number 11, earning $84 million, after the rock legends' key members Axl Rose and Slash reunited for the first time in 23 years.
The list can swing rapidly from year to year. Pop star Taylor Swift, who topped the previous year's list by earning $170 million, slipped to 49th place as she had concluded her tour.
The few non-Western celebrities on the list included Hong Kong martial arts film legend Jackie Chan at number 39 and Bollywood superstar Shah Rukh Khan at 65.