Liberty Interactive paid Diller and the Diller-von Furstenberg Family Foundation a total of about $300 million. Liberty will become the travel website's new majority shareholder.
TripAdvisor's stock price jumped 8 percent to $41.36 in early trading on Tuesday following news of the sale.
Diller, whose IAC/InterActiveCorp backs the ailing Newsweek and various other media properties, said in a statement that he would step down as chairman and sold his shares to attend to his other businesses.
Diller will remain a director at the Newton, Mass.-based travel site.
Liberty Interactive, which paid $62.50 per share, now owns 18.2 million shares of TripAdvisor. It also owns shopping websites like QVC shopping channel.