I am using it correctly, yes?
The diode should be from the input to ground, the resistor should be between the arduino input and the source.
I am simulating the low value sensor output (4mA) by running my 9v Vin through 2250ohm resistance, giving 4mA current.
There are two types of current loop output, active and passive. What sort do you have as it makes a difference to if you have to provide power of if it provides power.
Your resistor is in the wrong place and doing nothing useful. If you moved the resistor to the input line and changed the value to at least 1K it should work. I would also recommend changing the zener to 4.7 volt.
If this looks like a workable circuit to your expert eyes, I will be posting it along with my finished sketch to help anyone with 4-20mA sensors- my first contribution to the community! (yay!!!)
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