Cultural diplomacy is a type of soft power that includes the "exchange of ideas, information, art, language and other aspects of culture among nations and their peoples in order to foster mutual understanding". The purpose of cultural diplomacy is for the people of a foreign nation to develop an understanding of the nation's ideals and institutions in an effort to build broad support for economic and political objectives. In essence "cultural diplomacy reveals the soul of a nation", which in turn creates influence. Public diplomacy has played an important role in advancing national security objectives.

In a 2006 article in the Brown Journal of World Affairs, Cynthia P. Schneider wrote: "Public diplomacy consists of all a nation does to explain itself to the world, and cultural diplomacy – the use of creative expression and exchanges of ideas, information, and people to increase mutual understanding – supplies much of its content."

Culture is a set of values and practices that creates meaning for society. This includes both high culture (literature, art, and education, which appeals to elites) and popular culture (appeals to the masses). This is what governments seek to show foreign audiences when engaging in cultural diplomacy. It is a type of soft power, which is the "ability to get what you want through attraction rather than coercion or payments. It arises from a country's culture, political ideals and policies." This indicates that the value of culture is its ability to attract foreigners to a nation. Cultural diplomacy is also a component of public diplomacy. Public diplomacy is enhanced by a larger society and culture, but simultaneously public diplomacy helps to "amplify and advertise that society and culture to the world at large". It could be argued that the information component of public diplomacy can only be fully effective where there is already a relationship that gives credibility to the information being relayed. This comes from knowledge of the other's culture. Cultural diplomacy has been called the "linchpin of public diplomacy" because cultural activities have the potential to demonstrate the best of a nation.

Richard T. Arndt, a former State Department cultural diplomacy practitioner, said: "Cultural relations grow naturally and organically, without government intervention – the transactions of trade and tourism, student flows, communications, book circulation, migration, media access, inter-marriage – millions of daily cross-cultural encounters. If that is correct, cultural diplomacy can only be said to take place when formal diplomats, serving national governments, try to shape and channel this natural flow to advance national interests." It is important to note that, while cultural diplomacy is, as indicated above, a government activity, the private sector has a very real role to play because the government does not create culture, therefore, it can only attempt to make a culture known and define the impact this organic growth will have on national policies. Cultural diplomacy attempts to manage the international environment by utilizing these sources and achievements and making them known abroad. An important aspect of this is listening- cultural diplomacy is meant to be a two-way exchange. This exchange is then intended to foster a mutual understanding and thereby win influence within the target nation. Cultural diplomacy derives its credibility not from being close to government institutions, but from its proximity to cultural authorities.

Ultimately, the goal of cultural diplomacy is to influence a foreign audience and use that influence, which is built up over the long term, as a good will reserve to win support for policies. It seeks to harness the elements of culture to induce foreigners to:

In turn, cultural diplomacy can help a nation better understand the foreign nation it is engaged with and it fosters mutual understanding. Cultural diplomacy is a way of conducting international relations without expecting anything in return in the way that traditional diplomacy typically expects. Cultural exchange programs work as a medium to relay a favourable impression of the foreign country in order to gain outsiders' understanding and approval in their cultural practices and naturalize their social norms among other cultures.

Generally, cultural diplomacy is more focused on the longer term and less on specific policy matters. The intent is to build up influence over the long term for when it is needed by engaging people directly. This influence has implications ranging from national security to increasing tourism and commercial opportunities. It allows the government to create a "foundation of trust" and a mutual understanding that is neutral and built on people-to-people contact. Another unique and important element of cultural diplomacy is its ability to reach youth, non-elites and other audiences outside of the traditional embassy circuit. In short, cultural diplomacy plants the seeds of ideals, ideas, political arguments, spiritual perceptions and a general view point of the world that may or may not flourish in a foreign nation. Therefore, ideologies spread by cultural diplomacy about American values enables those that seek a better life to look towards the Western world where happiness and freedom are portrayed as desirable and achievable goals.

Cultural diplomacy is a demonstration of national power because it demonstrates to foreign audiences every aspect of culture, including wealth, scientific and technological advances, competitiveness in everything from sports and industry to military power, and a nation's overall confidence. The perception of power has important implications for a nation's ability to ensure its security. Furthermore, because cultural diplomacy includes political and ideological arguments, and uses the language of persuasion and advocacy, it can be used as an instrument of political warfare and be useful in achieving traditional goals of war.^{[additional citation(s) needed]} A Chinese activist was quoted as saying "We've seen a lot of Hollywood movies – they feature weddings, funerals and going to court. So now we think it's only natural to go to court a few times in your life."