After Diablo is defeated by the Nephalem (the player character), Tyrael recovers the Black Soulstone that contains the essence of all seven of the Great Evils. Knowing it is too dangerous to leave in the hands of mortals or angels, he and six Horadrim take the Black Soulstone back to Sanctuary and attempt to seal it away where it can never be found - deep in the tomb of Rakkis, the first King of Westmarch, the kingdom established to the west of Khanduras. However, the group is ambushed by Malthael, former Archangel of Wisdom and member and leader of the Angiris Council, who had disappeared after the destruction of the Worldstone after it was corrupted by Baal twenty years earlier (at the end of Diablo II: Lord of Destruction). Now calling himself the "Angel of Death", Malthael kills all but one of the Horadrim, incapacitates Tyrael in the process and steals the Black Soulstone.
Tyrael sends the surviving Horadrim, Lorath Nahr, to locate the Nephalem. Nahr encounters the Nephalem outside Westmarch City, which has been overrun by the Reapers, Malthael's army of enslaved spirits and renegade angels. With the gates blocked, the Nephalem fights through the city sewers to the Zakarum cathedral in the city center, where they encounter Tyrael. Tyrael reveals that with Diablo gone, Malthael sees humanity as a race of demons based on their descent from the original Nephalem, the offspring of angels and demons; by wiping out humanity, Malthael hopes to end the Eternal Conflict, the long war between Heaven and Hell. A sliver broke off from the Black Soulstone when Malthael took it, and Tyrael attempts to use it to discover Malthael's plans. The Reapers deploy two soul crucibles into Westmarch City to claim the souls of the dead, and the Nephalem locates and destroys them, earning the ire of Urzael, Malthael's chief lieutenant, who awaits the hero in Westmarch Heights. The Nephalem tracks Urzael down to the Tower of Korelan and defeats him in a gruesome battle.
The Nephalem learns from Myriam Jahzia, a mystic rescued during the attack against the soul crucibles, that Adria (the witch of Tristram from the original game, who is revealed to have been a servant of Diablo in Diablo III) is in Westmarch seeking to locate the Black Soulstone and resurrect her master again. Lorath decides to accompany the hero, then learns that Adria sealed the tomb's entrance with a rock slide, so he suggests unlocking the guide-stones to open the correct passageway. Travelling into the ancient ruins in the Blood Marsh outside Westmarch, the Nephalem confronts Adria, who manages to locate Malthael at the Pandemonium Fortress (last seen in Diablo II), built in the realm between Heaven and Hell to watch over the Worldstone. She then transforms into a winged demonic creature, claiming that Diablo sent her a vision of his return at the hands of the Nephalem, after which the Nephalem slays her. Upon learning of Malthael's location, Tyrael takes the Nephalem back into the High Heavens, where they find the Pandemonium Gate under attack by Malthael's Reapers. Upon defeating the attackers, they are met by Imperius, Aspect of Valor and the commander of Heaven's armies, who reluctantly admits that Malthael must be stopped and leads the Nephalem into the Realm of Pandemonium. Imperius directs the Nephalem to use an ancient battering ram to breach the fortress gates, using siege runes held by the demons trapped there.
Tyrael arrives just as the Nephalem prepares to activate the ram, revealing that he has discovered Malthael's plan; he intends to use the Black Soulstone to consume all demonic essence in Sanctuary, including that which makes up the bloodline of humanity, leading to its extinction. After breaching the gates with four hits with the battering ram, Tyrael informs the Nephalem that they must become "one with death", as Malthael is, in order to defeat him. Inside the fortress, the Nephalem encounters a figure from their past (dependent on their class) who directs them to unlock the soul prison kept in its depths. The Nephalem channels the spirits from the prison and takes on an aspect of death themselves, before moving on to defeat the guardians that bar the way to Malthael's sanctum at the heart of the fortress.
The Nephalem holds their own against Malthael for a time, until he shatters the Black Soulstone and takes the power of the Seven Evils within himself. The Nephalem ultimately triumphs, striking down Malthael and saving mankind from his attempt to exterminate it; however, Malthael's death frees the Seven Evils, shattering the Black Soulstone; fulfilling Adria's final prophecy. As Tyrael and Imperius look on after the Nephalem's victory, Tyrael sees the Nephalem in a new light: a protector of the innocent who can confront the most powerful champions of Heaven and Hell alike. Yet in the end the Nephalem still has a mortal heart that can be corrupted, and Tyrael wonders if the Nephalem will remain the savior, or become the doom of all creation.