Before engaging Diablo, go back to town, stock up on your potions and health, and talk to Cain the Elder. Try to purchase items of fire resistance from Griswold and Adria--Diablo likes it hot. When you're ready to leave, go back through the portal and then into the pentagram's centre. You'll have to carefully search Diablo's lair to find four levers, each of which opens a new area. Don't be afraid to use Telekinesis on a lever if you can't figure out how to get into a certain area. When you pull the fourth lever, all hell breaks loose--literally.
In multiplayer games, Diablo always dwells on the 16th level in an enclosed room in the southeast. Generally, the only way to face him is by clearing the rest of the level and pulling a series of four skull levers. There are alternatives, however, some of which are listed below. Once you meet Diablo, there are many ways to kill him. He can be defeated with weapons and most spells. (Note: Stone Curse does not work. Just ask Aldaen...) He will fight you back with fiery breath and sharp claws. Therefore, protection from fire and a high armor class are your best defences.
Diablo is always surrounded by a horde of followers, which makes killing him much more difficult; a good general strategy is to fight him when he's alone. One of the best ways to get him alone is to shoot a Holy Bolt at him from off screen. (You know he is located in the southeast corner. Before you pull the last skull lever, find Diablo's enclosure and determine an off screen location from which to shoot the Holy Bolt. If you are unsure whether the room is Diablo's lair, find or buy a scroll of Infravision and look inside.) Holy Bolt will fly past the followers and hit only Diablo. Keep shooting until you hear him growl; he will then chase you and leave his minions behind.
If you are going to fight Diablo in hand-to-hand, a Weapon of Haste (such as the King's Sword of Haste) is very helpful. If you can hit him fast enough, he won't have time to react. You can keep doing damage as he helplessly tries to swipe at you.
If you have a lot of magic, Fire Wall and Teleport can be your best friends. You wouldn't think that fire would hurt a demon, but it does--in all forms: ball, wall, wave, and so on. Lay a few Fire Walls next to each other and wait on the other side. Shoot him with whatever you have available until he passes through the walls of fire, then Teleport to the other side of them. Keep repeating these steps. Diablo will take damage each time he crosses the fire and each time you hit him. This works especially well in a corridor.
If you have the Golem spell and can afford to cast it, there is no need to get your hands dirty. Cast a Golem near Diablo, then run away, or better yet, use Teleport. Repeat these steps until Diablo dies. It will take several Golems, so bring mana potions.
In the southwest corner of level 16 is an enclosed room that contains two skull levers (surrounded by a throng of monsters), which must be pulled in order to free Diablo. Normally you would have to clear the rest of the level and pull other skull levers to gain access to this room. However, if your only goal is to free Diablo, you can pull the two skull levers in the southwest without opening the room. Just use Telekinesis.
If you don't want to bother with any levers, you can simply Teleport directly into Diablo's chamber. You will be immediately attacked by all of his minions, so be sure you can take the punishment. Casting Fire Wall can be very handy in this situation. Teleport in, cast some Fire Walls, and Teleport out. After you've healed, repeat these steps. All of the monsters, including Diablo, will soon turn to ash. If you are going to use this strategy, be sure you have a Weapon of Haste (fastest attack) or a Ring/Armor of Harmony (fastest recovery). Otherwise, you will not have enough time to cast a spell.
Once you have finally killed Diablo, you are treated to the story's ending scenes. When you're finished watching, the game is over. In other words, don't leave anything in the game before you fight Diablo. You won't have a chance to pick it up afterward.
In addition to their certain swagger and sway, it's easy to recognise those who have challenged the Beast and come away victorious. On Battle.net, you will notice that some character portraits have dots over their heads. You earn a dot each time you kill Diablo on a different difficulty level. Those characters sporting three dots have killed the grand nemesis at Hell difficulty.