The game takes place in Sanctuary, the dark fantasy world of the Diablo series, twenty years after the events of Diablo II. Deckard Cain and his niece Leah are in the Tristram Cathedral investigating ancient texts regarding an ominous prophecy. Suddenly, a mysterious star falling from the sky strikes the Cathedral, creating a deep crater into which Deckard Cain disappears.

The player character, known as the Nephalem, arrives in New Tristram to investigate the fallen star. The Nephalem rescues Cain upon Leah's request and discovers that the fallen object is actually a person. The stranger has no memories except that he lost his sword, which was shattered into three pieces. Although the Nephalem retrieves the pieces, the witch Maghda seizes the shards and attempts to capture Cain to force him to repair the sword for her own ends. However, with an uncontrolled display of power, Leah forces Maghda to flee, and she kidnaps the stranger instead.

Cain, dying from Maghda's torture, uses the last of his strength to repair the sword and instructs the Nephalem to return it to the stranger. The Nephalem rescues the stranger and returns his sword, causing him to regain his memories. The stranger then reveals himself as the fallen angel Tyrael. Disgusted with his fellow angels' unwillingness to protect humanity from the forces of Hell, Tyrael cast aside his divinity to become a mortal and warn Sanctuary about the arrival of the demon lords Belial and Azmodan.