Ladbrokes currently give James odds of 4/6, well ahead of the second favourite Steven Woolfe who has odds of 6/4.
Paul Nuttall, who was the favourite along with Woolfe a month ago, is out of the running after ruling himself out of the leadership race.
Steven Woolfe lengthening odds are likely down to the Huffington Post's revelation that he had a drink-driving conviction in 2002 - something he failed to declare when he stood as Police and Crime Commissioner (PCC) in 2012.
Questioned about the omission, Woolfe said: "I made a foolish mistake 14 years ago which I regret. As the years went on I forgot about the conviction as I got on with my life."
But it could be a major problem for his leadership aspirations. The Police Reform and Criminal Responsibility Act 2011, states that:
"An individual will be disqualified from being elected as a PCC if they have been convicted in the United Kingdom, the Channel Islands, or the Isle of Man, of any imprisonable offence - whether or not actually sentenced to a term of imprisonment in respect of the offence."
The conviction could jeopardise Woolfe's place on the ballot for breaching Electoral Commission rules, which say that "it is a criminal offence to make a false statement on your nomination papers as to your qualification for being elected, so it would be a matter for the police if this had occurred."
With Woolfe's ability to even stand for Ukip leadership in question and Nuttall out of the race, James has become the natural favourite.
Who is she?
Diane James is a Member of the European Parliament (MEP) for South East England. Having worked as a healthcare consultant, she was elected to Waverley Borough Council as an Independent and joined UKIP shortly after her election in 2011. Despite her new allegiance to UKIP, she refused to stand again in a by-election, and eventually lost her seat in 2015.
She is currently the party's Home Affairs spokesperson. Although she has had a relatively quite career at UKIP, she made headlines in 2015 for praising Vladimir Putin, saying: "I do admire him, he's a very strong leader, he's putting Russia first. He has issues with the way the EU encouraged a change of government in the Ukraine which he thought put at risk and put in danger the Russian population in that country."
UKIPleadershiphup election will take place on September 15.