Kashyap got past his gritty rival 21-13 23-25 21-11 in a match that lasted close to an hour. He will face seventh seed Tien Minh Nguyen of Vietnam in the second round.
The world number 28 Indian, who had beaten Dieter thrice before -- in 2008 and 2009, kept his unbeaten record against the German intact.
The opening game belonged to Kashyap, who sent down as many as 10 smash winners to get the upperhand.
Dieter came back in the second game, keeping pace with Kashyap all through before managing to sneak ahead in the closing stages.
But the recovery was short-lived as Kashyap once again relied on his smashes to outwit his spirited rival in the deciding third game.
Kashyap also had better control of the proceedings clinching 10 consecutive points at one stage of the game.