This study incorporates the well-known diffuse-interface concept into the meshless smoothed particle hydrodynamics (SPH) method for compressible multiphase flow simulations. The diffuse-interface SPH method combines the merits of the diffuse-interface and SPH methods in treating material interface. The material interface location is explicitly tracked because of the Lagrangian nature of SPH. On the other hand, introducing the diffuse-interface method helps reduce the artificial numerical oscillations due to the presence of discontinuity near the material interface. The Lagrangian form of the five-equation model is solved, while the volume fraction is explicitly updated via SPH kernel approximation instead of solving the advection equation. A diffuse-interface zone with a certain width is artificially established at the material interface of different fluids. A smooth variation of physical properties across the interface zone is assumed, and the mixing rules are proposed, similar to the grid-based method, to reconstruct the physical properties. Moreover, the volume adaptive scheme (VAS) is adopted to maintain the uniform distribution of particles in strong compressible flows. A set of one-dimensional multi-fluid shock tube problems and typical two-dimensional numerical experiments in compressible multiphase flows is presented to investigate the performance of the proposed method. Numerical results suggest the capability of the new method to capture the material interfaces and the shock-interface interactions without spurious numerical oscillations.