Magnetic field-induced particle manipulation is a promising technique for biomicrofluidics applications. It is simple, cheap, and also free of fluid heating issues that accompany other common electric, acoustic, and optical methods. This work presents a fundamental study of diamagnetic particle motion in ferrofluid flows through a rectangular microchannel with a nearby permanent magnet. Due to their negligible magnetization relative to the ferrofluid, diamagnetic particles experience negative magnetophoresis and are repelled away from the magnet. The result is a three-dimensionally focused particle stream flowing near the bottom outer corner of the microchannel that is the farthest to the center of the magnet and hence has the smallest magnetic field. The effects of the particle's relative position to the magnet, particle size, ferrofluid flow rate, and concentration on this three-dimensional diamagnetic particle deflection are systematically studied. The obtained experimental results agree quantitatively with the predictions of a three-dimensional analytical model.