Most overlooked challenges in ultrafast optical time stretch imaging (OTSI) are sacrificed spatial resolution and higher optical loss. These challenges are originated from optical diffraction devices used in OTSI, which encode image into spectra of ultrashort optical pulses. Conventional free-space diffraction gratings, as widely used in existing OTSI systems, suffer from several inherent drawbacks: limited diffraction efficiency in a non-Littrow configuration due to inherent zeroth-order reflection, high coupling loss between free-space gratings and optical fibers, bulky footprint, and more importantly, sacrificed imaging resolution due to non-full-aperture illumination for individual wavelengths. Here we report resolution-improved and diffraction-efficient OTSI using in-fiber diffraction for the first time to our knowledge. The key to overcome the existing challenges is a 45° tilted fiber grating (TFG), which serves as a compact in-fiber diffraction device offering improved diffraction efficiency (up to 97%), inherent compatibility with optical fibers, and improved imaging resolution owning to almost full-aperture illumination for all illumination wavelengths. 50 million frames per second imaging of fast moving object at 46 m/s with improved imaging resolution has been demonstrated. This conceptually new in-fiber diffraction design opens the way towards cost-effective, compact and high-resolution OTSI systems for image-based high-throughput detection and measurement.