Online distillation attracts attention from the community as it simplifies the traditional two-stage knowledge distillation process into a single stage. Online distillation collaboratively trains a group of peer models, which are treated as students, and all students gain extra knowledge from each other. However, memory consumption and diversity among peers are two key challenges to the scalability and quality of online distillation. To address the two challenges, this paper presents a framework called Weighted Mutual Learning with Diversity-Driven Model Compression (WML) for online distillation. First, at the base of a hierarchical structure where peers share different parts, we leverage the structured network pruning to generate diversified peer models and reduce the memory requirements. Second, rather than taking the average of peers, this paper, for the first time, leverages a bi-level formulation to estimate the relative importance of peers with a close-form, to further boost the effectiveness of the distillation from each other. Extensive experiments show the generalization of the proposed framework, which outperforms existing online distillation methods on a variety of deep neural networks. More interesting, as a byproduct, \WML produces a series of pruned models under different model sizes in a single run, which also achieves competitive results compared with existing channel pruning methods.