An advanced light-fidelity (Li-Fi) system based on the blue Gallium nitride (GaN) laser diode (LD) with a compact white-light phosphorous diffuser is demonstrated for fusing the indoor white-lighting and visible light communication (VLC). The phosphorous diffuser adhered blue GaN LD broadens luminescent spectrum and diverges beam spot to provide ample functionality including the completeness of Li-Fi feature and the quality of white-lighting. The phosphorous diffuser diverged white-light spot covers a radiant angle up to 120o with CIE coordinates of (0.34, 0.37). On the other hand, the degradation on throughput frequency response of the blue LD is mainly attributed to the self-feedback caused by the reflection from the phosphor-air interface. It represents the current state-of-the-art performance on carrying 5.2-Gbit/s orthogonal frequency-division multiplexed 16-quadrature-amplitude modulation (16-QAM OFDM) data with a bit error rate (BER) of 3.1 × 10−3 over a 60-cm free-space link. This work aims to explore the plausibility of the phosphorous diffuser diverged blue GaN LD for future hybrid white-lighting and VLC systems.