Understanding the unsteady fluid dynamics inside the diffuser holds the key to improve the performance of centrifugal compressor. A detailed computational study has been conducted in a low-speed centrifugal compressor to understand the unsteady flow mechanisms that govern the static pressure recovery inside the vaned diffusers. Simulations are carried out for three different leading edge locations at design and off-design conditions. The study is carried out using Reynolds-averaged Navier-Stokes simulations. This study revealed that the unsteady fluctuations exhibit contrasting behavior at different radial gaps and flow coefficients. An optimum radial gap is strictly a function of the stage loading. A high radial gap helps contain the fluctuations at low flow coefficients, but it enhances the fluctuations at high flow coefficients. If the leading edge is kept close to the impeller blade, then the above design flow coefficient of the vaned passage facilitates a reduction in the unsteady fluctuations. On the contrary, keeping the leading edge close to the impeller blade can accelerate the unsteady fluctuations at low flow coefficients. © 2017, The Korean Society of Mechanical Engineers and Springer-Verlag GmbH Germany, part of Springer Nature.