Why is this diagonal board notched into my wall studs?

That diagonal member is a permanent rack brace, often called a **let-in brace**. You hit the nail on the head regarding the effort involved; framers whould never spend the time notching out every single stud just for a temporary construction brace. If it were temporary, they would have just tacked a 2x4 across the face of the studs and pulled it once the drywall or sheathing went up. The fact that it’s recessed means it’s designed to provide lateral stability for the life of the structure, preventing the wall from 'racking' or leaning over under pressure.

Before structural plywood sheathing became the standard for shear strength, these let-in braces were the primary way we kept houses from shifting. Since this is an interior wall, it might be acting as an internal shear wall to help the overall rigidity of the house, especially if you're in an older home or a region with high wind or seismic activity. Cutting it out without a plan is a bad idea beacuse you'll lose that triangulation that keeps the wall square. If you absolutely must put a door there, you can't just remove the brace and call it a day. You need to compensate for the lost structural integrity. usally, this means installing **structural sheathing** like 7/16" OSB or plywood on at least one side of the wall, nailed off every 6 inches on the edges and 12 inches in the field. This creates a shear panel that does the same job as that diagonal board but allows you to cut the opening you need. Since you've got plumbing and electrical in there, you have to be careful about your nail lengths so you don't puncture a pipe when installing new sheathing. My advice is to frame your new door header and king studs first, then add the sheathing to the remaining sections of the wall before you ever touch that brace with a saw. This ensures the wall stays dead-on square throughout the process. Once the new framing and sheathing are locked in, then you can safely cut out the section of the brace that's blocking your new doorway.

Wow, I’m just starting to learn framing and seeing that notched-out detail is honestly so cool! It looks like such a craftsmanship flex compared to just slapping on some OSB. Since the builders were clearly going for quality, I’m curious—back when these let-in braces were common, did they use specific hand saws to get those notches so clean? I've been practicing my birdsmouth cuts and I can't imagine doing a whole wall of these by hand without it taking forever!

Are we sure this is actualy a structural let-in brace? I've seen plenty of old-school guys notch studs just to keep a long run of electrical or plumbing from vibrating against the wall cavity, or even just for a nailer. Have you ruled out the possibility that it’s just a fire block or a simple stiffener for a non-load-bearing partition? Before you go thru the hassle of adding OSB shear panels, it might be worth double-checking if there’s even a top plate connection. If it’s not tied into the plates properly, it's not doing much for racking anyway.

I'm still trying to wrap my head around the structural stuff. If I do have to add that OSB sheathing like you mentioned, does it have to go from the floor all the way to the ceiling to count as a 'shear panel'? I don't know much about how the physics of it works, but if I only put the plywood on the bottom half or just one side of the door, would the wall still be able to lean? Also, is there a specific type of nail that's better for this so I don't accidentally hit those copper pipes?

You'll want to be extremely careful cutting that out near those copper lines. I always use a Milwaukee M18 FUEL Oscillating Multi-Tool for this kind of surgical work because a reciprocating saw will vibrate the pipes way too much and could cause a leak.

When you go to beef up the framing to replace that structural support, pick up a box of GRK RSS Structural Screws instead of using standard nails. They have incredible drawing power to pull your new studs tight against the old ones, and you won't risk hammer-swinging accidents near your electrical runs.