A novel subpixel rendering algorithm for diamond-shaped PenTile displays, which improves the apparent display resolution and reduces color fringing artifacts, is proposed in this work. We develop two types of filters: main filters and nonnegative filters. First, the main filters are derived to minimize the error between an original input image and a perceived image. Second, the nonnegative filters are modified from the main filters. While the main filters are optimized for improving the resolution, the nonnegative filters suppress color distortions effectively. We analyze local characteristics of an image and estimate the amount of color distortions in each region. Based on the color distortion analysis, we render the image by applying adaptive combinations of the main filters and the nonnegative filters. Experimental results demonstrate that the proposed algorithm outperforms conventional algorithms, by not only improving the apparent resolution but also suppressing color distortions effectively.