We analyze the properties of Generalized Phase Contrast (GPC) when the input phase modulation is implemented using diffractive gratings. In GPC applications for patterned illumination, the use of a dynamic diffractive optical element for encoding the GPC input phase allows for onthe- fly optimization of the input aperture parameters according to desired output characteristics. For wavefront sensing, the achieved aperture control opens a new degree of freedom for improving the accuracy of quantitative phase imaging. Diffractive GPC input modulation also fits well with grating-based optical security applications and can be used to create phasebased information channels for enhanced information security.