In 1986, still in New York, McDiarmid was diagnosed HIV positive and decided to return to Australia. Back in Sydney McDiarmid devoted himself to producing art which raised awareness of the AIDS epidemic and empowered those who were HIV positive. His influential one-person exhibition focussing on the sexual and cultural politics of AIDS, 'Kiss of Light', was held at the Syme Dodson Gallery, Sydney in 1991. This exhibition inspired the AIDS Council of New South Wales to commission from McDiarmid a series of five safe sex and safe injecting posters which were launched at the Museum of Contemporary Art, Sydney, in April 1992. Between 1988 and 1992, McDiarmid was variously both artist/designer and artistic director for the
Sydney Gay and Lesbian Mardi Gras. He was recognised in this period for his support of lesbian contributions to the culture and design aesthetic of the Mardi Gras parade, party and festival. Among other creative contributions, he designed a large-scale street parade sculpture based on the Mexican Day of the Dead with members of the HIV Living Group for the 1992 Sydney Gay and Lesbian Mardi Gras parade. The graphics from his 1992 Safe Sex posters which were also subsequently enlarged to form gigantic moving figures for the Mardi Gras parade. In 1993 McDiarmid wrote the illustrated (with 35mm slide transparencies) lecture ‘A Short History of Facial Hair’ tracing his personal, political and sexual history ‘from camp to gay to queer’. This was presented at the Melbourne conference ‘AIDS: Towards a Paradigm’ (and later developed into the digital film "A Short History of Facial Hair" for a London exhibition in 2011). McDiarmid's 1993 artist's book and photocopied collaged multiples titled ‘Toxic Queen’ focused on the virulent homophobia re-energised by the AIDS epidemic and positioned McDiarmid as a leading queer artist as sensibilities changed from ‘gay to queer’. David McDiarmid was also an accomplished graphic designer designing all the posters for his own exhibitions and those of Peter Tully. He designed posters and print collateral for the Sydney Gay and Lesbian Mardi Gras in 1986, 1988 and 1990, as well as posters for Pride and Sleaze Ball dance parties, AIDS candlelight vigils, World AIDS Day and the ACON safe sex poster series of 1992. One of the first artists to use digital technology in the production of art, McDiarmid's digital ‘Rainbow Aphorisms’ were a strong presence in the exhibition ‘Don’t Leave Me This Way: Art in the Age of AIDS’ at the
National Gallery of Australia, Canberra, curated by Dr Ted Gott in 1994. His numerous group exhibitions through the 1990s also included: 'Pink Summers', Sydney Gay and Lesbian Mardi Gras Festival, (1990); ‘Beauty and the Beast’, Tin Sheds Gallery, The University of Sydney (1991); ‘The Phallus and its Functions’, Ivan Dougherty Gallery, Sydney (1992); ‘Stormy Weather’, national touring exhibition (1992); ‘You Are Here’, Institute of Modern Art, Brisbane,
Australian Centre for Contemporary Art, Melbourne and CACSA, Adelaide (1993); ‘The Streets as Art Galleries – Walls Sometimes Speak: Poster Art in Australia’, The National Gallery of Australia, Canberra (1993); ‘Leather Pride Week Exhibition’, The Warehouse, Sydney (1993); ‘Nine Artists’ Barry Stern Gallery, Sydney (1993); ‘The Australian Scarf’, Hyde Park Barracks (1993); ‘Fighting Back: The Art of AIDS Education’, The Drill Hall Gallery, ANU, Canberra (1993); ‘Death’, Ivan Dougherty Gallery (1993); ‘Mardi Gras 1993’, Barry Stern Gallery (1993). McDiarmid's last group exhibition was ‘Australian Perspecta 1995’, a survey of contemporary art, curated by Judy Annear at the Art Gallery of New South Wales. His huge rainbow ‘Q’ inserted into the tympanum of the gallery's neo-classical façade was McDiarmid's last gesture of “queering the art museum”. == Legacy (1995-)==