Diablo's magic has been replaced with skills: class specific abilities that can be purchased with skill points as characters level up.

Much of the customization relies on equipment and item combinations. The player character gains experience points from slaying monsters, and can be leveled up manually, increasing his or her primary attributes and acquiring abilities. Unlike the previous game, the environments are not restricted to a single dungeon and include variously themed locations, each with its own town and quests.

Much of the game takes place in randomized dungeon-like areas heavily populated by enemies. The player may choose between five available characters classes: Amazon (a rogue-like class with ranged attacks), Necromancer (can summon undead and inflict status ailments), Barbarian (a powerful melee fighter who can dual-wield weapons), Sorceress (offensive spellcaster), and Paladin (fights with shields and can cast support spells). Like its predecessor, Diablo II is an action role-playing game. A nameless adventurer visits the Rogue Encampment and decides to help its inhabitants by slaying monsters surrounding the area, and eventually pursuing the Dark Wanderer himself. He has turned into the Dark Wanderer, a mysterious being whose every step causes destruction and death.

Diablo's essence corrupted him, gradually taking over his human nature. Knowing well that Diablo's spirit could never be truly destroyed, the hero of Tristram made the noblest sacrifice of all: he took the spirit of the Lord of Terror into himself, hoping that his strength of will could contain the demon within.

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