Diouf, 26, is out of contract with his German Bundesliga side in June and netted twice in the last ten minutes in their 3-1 home win over Borussia Moenchengladbach.
Cardiff City manager Ole Gunnar Solskjaer is reported to have tried to lure his former Manchester United team-mate back to the Premier League in last month's transfer window. But Diouf is now keen to extend his Hanover stay after a below-par start to the season.
"I love the city and I am starting to play like I want to; I want to focus on what happens on the pitch and we'll see what happens," said the ex-Blackburn Rovers striker.
Hannover had been chasing 20-year-old Chile forward Nicolas Castillo - who scored four goals at the FIFA U-20 World cup Turkey 2013 but he opted to sign for Belgium's FC Brugge in January's transfer window. But Diouf has produced improved performances in his side's last two wins as Hanover moved up to tenth in the table.
He struggled in the first half of the season when ex-Hannover coach Mirko Slomka played him as a lone striker. New coach Tayfun Korkut has introduced a 4-4-2 formation and Diouf has flourished, providing two assists in last weekend's 3-1 win at VfL Wolfsburg.
The Senegal star said he is enjoying playing alongside Latvia's Artjoms Rudnevs, who has now scored two goals in his two games since joining on loan from Hamburg last month. "As a striker, it's good to have someone next to you, we work well together, we help each other out when we get tired," said Diouf.