A coolant diverter system and method of controlling coolant flow are provided. The coolant diverter system includes a coolant diverter body having a coolant inlet opening, a driveline retarder outlet opening and a bypass outlet opening. The coolant diverter system also includes a valve positioned in the coolant diverter body. The valve is configured in a first valve orientation to fluidly couple the coolant inlet opening to the driveline retarder outlet opening in isolation from the bypass outlet opening. The valve is configured in a second valve orientation to fluidly couple the coolant inlet opening to the driveline retarder outlet opening and the bypass outlet opening. The coolant diverter system also includes a valve controller configured to place the valve in the first valve orientation in response to activation of a driveline retarder coupled to the driveline retarder outlet opening for braking.