Mephisto was the first Prime Evil to be captured, and his Soulstone was put into the hands of the local priesthood, the Zakarum, for safekeeping. They kept it under a Zakarum temple in what would eventually become Kurast. In the meantime, the Horadrim pursued and eventually captured all three of the Prime Evils.
Eventually, however, Mephisto managed to overcome the powers of the Soulstone that imprisoned him enough to influence and corrupt the Zakarum. The demon then had the priests work spells to shatter the Soulstone into seven shards, breaking the mystic seal and freeing the Lord of Hatred.
Tips and Other Additional Information
Clear out any nearby Council Members or monsters in the area. If you're
unable to kill some of the Council Members you can use this trick:
open up a Town Portal in the middle room with Mephisto or the left
room. Then lead any Council Members you're unable to kill to the stairs
that lead to Durance of Hate Level 2. Now run back to the Waypoint
in Durance of Hate Level 2 and use it to go back to Town. From Town
enter your Town Portal and you'll be back in Mephisto's Lair. The
Council Members will be back at the stairs out of the way, if you
lead them away correctly and placed the Town Portal far enough away
from the stairs. You'll now be able to attack Mephisto without his
being helped by those council Members.
Cold and Lightning Resistance helps a lot against Mephisto.
Mephisto uses the following Skills: Lightning, Charged Bolt, Poison
Nova, "Skull" Missile, Frost Nova, Blizzard.