We estimate the sensitivity of LHAASO telescope for the large angular scale diffuse gamma-ray flux in multi-TeV - multi-PeV energy range. We discuss possible sources of the signal in this energy range including the guaranteed flux from cosmic ray interactions in the interstellar medium and possible flux from decaying dark matter. We show that LHAASO will be able to detect the diffuse cosmic ray induced gamma-ray flux up to high Galactic latitude regions thus providing firm identification of the Galactic cosmic ray component of the astrophysical neutrino signal detected by IceCube and clarification of the nature of the knee feature of the cosmic ray spectrum. Comparing the diffuse flux sensitivity with the diffuse gamma-ray flux expected from the dark matter decays, we show LHAASO will be able to detect the gamma-ray signal from dark matter particles of PeV-EeV mass decaying on the time scale up to 3e29 s.