A wave augmented diffuser for a centrifugal compressor surrounds the outlet of an impeller that rotates on a drive shaft having an axis of rotation. The impeller brings flow in in an axial direction and imparts kinetic energy to the flow discharging it in radial and tangential directions. The flow is discharged into a plurality of circumferentially disposed wave chambers. The wave chambers are periodically opened and closed by a rotary valve such that the flow through the diffuser is unsteady. The valve includes a plurality of valve openings that are periodically brought into and out of fluid communication with the wave chambers. When the wave chambers are closed, a reflected compression wave moves upstream towards the diffuser bringing the flow into the wave chamber to rest. This action recovers the kinetic energy from the flow and limits any boundary layer growth. The flow is then discharged in an axial direction through an opening in the valve plate when the valve plate is rotated to an open position. The diffuser thus efficiently raises the static pressure of the fluid and discharges an axially directed flow at a radius that is predominantly below the maximum radius of the diffuser.