My project reads an external 5v sensor but is limited by arduino's power diode that drops the voltage to 4.3 Volts. This means that i can only read up to 4.x volts of sensor.
So i'm thinking to use a voltage divider that will transform 5V to 4.123v, which is below the 4.3V max that the system can read, then use math to map the voltage to the correct reading
What power diode? Which Aruino board? On an Uno the only diode that I know of is between the power input jack and the 5V regulator. That won't matter to the 5V because the voltage into the power jack should be 7V to 12V. If you are putting 5V into the power jack, you are doing it wrong.
The voltage divider will work (assuming the sensor can put-out enough current).
But in "most circuits", the sensor would be powered by the same power supply as the Arduino (or from the Arduino's 5V output) so if the Arduino voltage is low the sensor voltage is also low.