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This depends on the condition a person finds themself in when this choice is presented to them. The marginal utility of a thing is solely in the "eye of the beholder." Therefore, the marginal utility of these things will vary with the condition of the "consumer."
For a person who is very thirsty, the marginal benefit of the water is greater than that of the diamond. If a person is truly dying of thirst, the marginal utility of the water is almost infinite while the diamond would be useless.
To a person who wants to propose marriage, however, the situation is reversed and the marginal utility of the diamond is much higher.
This is because marginal utility is defined as how much satisfaction a given person gets from consuming the object in question. This amount will vary with the situation.
I am providing this additional note to my answer above in response to a comment to it by eNotes, which implies that my answer does not add anything to the previous response by Pohnpei.
It is worthwhile noting that the response of Pohnpei does not talk about supply and availability aspect of commodities which in turn affects the marginal utility under normal circumstances. Marginal utility of diamond is, in genera, l higher than that of water because supply of diamond is scarce while that of water is abundant. If supply of diamond was as abundant as that of water, the marginal utility of diamond under normal circumstances would have been comparable to pebbles.
For both 1 carat of diamond and 1 glass of water we are talking about the marginal utility. This is very much dependent on the quantity of a good one already has. For a person living on the banks of a river with clean water, the benefit or value of an additional glass of water is zero. But for the same person the value of the same one glass of water would be much more than the value of a fistful of diamond, if he was stuck in a desert without water and needs it to save his own and his family members lives.
In general the value of an additional glass will be less than a carat of diamonds because water is available in plenty, and a person usually has enough water to meet his needs. In comparison diamond are scarce, and most of the people in the world do not have any diamonds at all.
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