Strategy used by one in diplomacy, extremely cautious (7)
I believe the answer is:
tactics
'strategy' is the definition.
(I've seen this before)
'one in diplomacy extremely cautious' is the wordplay.
'one' becomes 'i' (Roman numeral).
'in' indicates putting letters inside.
'diplomacy' becomes 'tact' (tact can mean diplomacy or sensitivity).
'extremely' says to hollow out the word (remove centre letters) (only the extremes of the word are used).
'cautious' with its centre removed is 'cs'.
'tact'+'cs'='tactcs'
'i' placed into 'tactcs' is 'TACTICS'.
'used by' acts as a link.
(Other definitions for tactics that I've seen before include "Use of available means to reach an end" , "Methods employed to achieve an end" , "Skill of using available means to reach an end" , "procedures" , "The means adopted to achieve an end" .)