Palace in cathedral city and diocese (6)
I believe the answer is:
elysee
'palace' is the definition.
(I've seen this before)
'cathedral city and diocese' is the wordplay.
'cathedral city' becomes 'ely' (I've seen this before).
'and' says to put letters next to each other.
'diocese' becomes 'see' (I've seen this before).
'ely'+'see'='ELYSEE'
'in' acts as a link.
(Other definitions for elysee that I've seen before include "French leader's palace" , "Official palace in Paris" , "Official residence of the French president" , "Parisian palace" , "Palace occupied by the French president" .)