The story of Diablo is based on the premise of a war between Heaven and Hell. The town of Tristram is under attack by demons, and the player must save the town. As the player delves into the underworld, he discovers more about the demon Diablo, through large tomes that are found throughout the levels. Eventually, the player reaches the lair of Diablo and must kill him. Here is a more detailed summary of Diablo's history:

Diablo, an incredibly powerful demon, is the Lord of Terror and one of the Three Prime Evils of Hell, who had been imprisoned in a Soulstone and buried in caverns deep beneath the town of Tristram. Though his imprisonment was meant to be eternal, the power of the Soulstone weakened over centuries, eventually allowing Diablo to awaken from his forced slumber. He telepathically turns a nearby human, the Archbishop Lazarus, into his loyal puppet. In order for Diablo to actually leave the Soul stone, Diablo needs a human to possess. At first he tries to gain control of King Leoric, the local ruler, through his puppet, Lazarus. But, since Diablo is too weak to possess the king, he fails and merely drives the unfortunate monarch insane. He then gets Lazarus to kidnap King Leoric's son, Prince Albrecht, so that Diablo can possess and warp him, thereby attaining material form and freedom from the stone. At the moment of the boy's possession, his terror is so great that the boundaries between the realms are broken and parts of Hell seep into the mortal world and take root in the subterranean labyrinth beneath Tristram. Diablo may have a body now, but he is far from his full power, so he bides his time and summons countless hordes of demons and infests the whole underground complex, claiming the new region of Hell as his own personal lair.

Soon afterwards the maddened Leoric is slain by his own lieutenants. Demons appear in the countryside as the Lord of Terror regains his strength in the heart of the labyrinth and prepares for the time when he would once again emerge to seek his brothers - Baal and Mephisto - and free them as well. It seemed to be a matter of time until the Prime Evils gained dominion over the entire mortal realm.

Then, one day, a lone traveller approaches the town of Tristram