This paper introduces an advanced localized space-time Trefftz method tackling boundary value predicaments within complex two-dimensional domains governed by diffusion equations. In contrast to the widespread space-time collocation Trefftz method, which typically produces dense and ill-conditioned matrices, the proposed strategy employs a localized collocation scheme to remove these constraints. In particular, this is beneficial in multi-connected configurations or when dealing with significant variations in field values. To the best of our knowledge, this is the first space-time collocation Trefftz method adaptation, which is referred to as the localized space-time Trefftz method in this paper. The latter combines the space-time collocation Trefftz method principles, which allows to eliminate the need for mesh and numerical quadrature in its application. The localized space-time Trefftz method represents each interior node expressed as a linear blend of its immediate neighbors, while the space-time collocation Trefftz method applies numerical techniques within distinct subdomains. A sparse system of linear algebraic equations with internal points satisfying the governing equation, and boundary points satisfying the boundary conditions, allows to obtain numerical solutions using matrix systems. The localized space-time Trefftz method retains the easy-to-use properties and mesh-free structure of the space-time collocation Trefftz method, and it mitigates its ill-conditioning characteristics. Due to the localization principle and the consideration of overlapping subdomains, the solutions in the proposed localized space-time Trefftz method are more simply and compactly expressed compared with those in the space-time collocation Trefftz method, especially when dealing with multiply-connected domains. Numerical examples for simply-connected and multiply-connected domains are then provided to demonstrate the high precision and simplicity of the proposed localized space-time Trefftz method. The obtained results show that the latter has very high accuracy in solving two-dimensional diffusion problems. Compared with the traditional space-time collocation Trefftz method, the proposed mesh-free strategy yields solutions with higher precision while significantly reducing the instability.