Power produced by a wind turbine is directly proportional to the cube of wind velocity. Small amount of increase in wind velocity significantly increases power output. Use of diffuser around the wind turbine causes pressure reduction behind the wind turbine and draws more air flow at increased velocity through the rotor. The length of the diffuser and associated problems are the barriers for field application and commercialization of diffuser augmented wind turbine. A compact diffuser with low length to diameter ratio is desirable for field application. In this work computational fluid dynamics analysis is carried out for three different diffusers - diffuser without flange, diffuser with vertical flange and diffuser with inclined flange for a micro wind turbine. Aim of the work is the optimization of diffuser to achieve maximum wind velocity.