Identifying accurate cell markers in single-cell RNA-seq data is crucial for understanding cellular diversity and function. Localized Marker Detector (LMD) is a novel tool to identify "localized genes"-genes exclusively expressed in groups of highly similar cells-thereby characterizing cellular diversity in a multi-resolution and fine-grained manner. LMD constructs a cell-cell affinity graph, diffuses the gene expression value across the cell graph, and assigns a score to each gene based on its diffusion dynamics. LMD's candidate markers can be grouped into functional gene modules, which accurately reflect cell types, subtypes, and other sources of variation such as cell cycle status. We apply LMD to mouse bone marrow and hair follicle dermal condensate datasets, where it facilitates cross-sample comparisons by identifying shared and sample-specific gene signatures and novel cell populations, without requiring batch effect correction or integration. We also assess the performance of LMD across ten single-cell RNA sequencing datasets, compare it to eight existing methods with similar objectives, and find that LMD outperforms the other methods evaluated.