This paper presents Michael E. Porter’s diamond model for the competitive advantage in the context of the new regional development paradigm, i.e., a knowledge based economy. The model is sufficiently flexible to adapt it to the changing economic conditions, and changes in the related regional development theories. The incorporation into the model such factors as innovation or agglomeration benefits associated with formal and informal knowledge accumulation and transfer, and public policy establishing a dynamic adaptive capability, creates an extremely modern instrument. The study proves that due to such adaptation the model becomes relevant for the analysis of prospective region’s competitive advantage in the context of the knowledge based economy paradigm.