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In this paper, the inverse problem of determining the time‐dependent reaction–diffusion coefficient in the Cauchy problem for the time‐fractional diffusion equation with the Hilfer operator by a single observation at the point x=0$$ x=0 $$ of the diffusion process is studied. To represent the solution of the direct problem, the fundamental solution of this equation is constructed and properties of this solution are investigated. The fundamental solution contains Fox's H$$ H $$‐functions widely used in fractional calculus. The fundamental solution for the fractional diffusion operator with the Hilfer derivative is also obtained in terms of the Yang Y$$ Y $$‐function, and it is shown that they coincide. Using estimates of the fundamental solution and its derivatives, an estimate for the solution of the direct problem is obtained in terms of the norm of the unknown coefficient, which will be used in investigation of inverse problem. The inverse problem is reduced to the equivalent integral equation. For solving this equation, the contracted mapping principle is applied. The local existence and global uniqueness results and the conditional stability estimate of solution are proven. [ABSTRACT FROM AUTHOR]