Isolation identification and characterization of the structures of degradation products is typically collaborative research involving knowledge of analytical and organic chemistry with spectroscopic information. Stability testing guidelines issued by International Conference on Harmonization (ICH) require the reporting, identification and characterization of degradation products. A simple, selective and reproducible stability-indicating liquid chromatographic method was developed for the determination of Diacerein. Developed method was used to evaluate the Diacerein in bulk drug and its degradation product. The drug was subjected to stress conditions of acid hydrolysis, alkali hydrolysis, oxidation, thermal and photo degradation according to ICH guidelines. The drug was found to degrade extensively in alkali. The drug and the degraded compounds were separated by isocratic reverse-phase high performance liquid chromatography. An isocratic separation was achieved using a thermosil C18 column (ODS-3, 250×4.6 mm, 5 $\mu$m) with a flow rate of 1 ml/min and using a UV detector set at 254 nm. The mobile phase consisted of Phosphate buffer (pH 3.6): acetonitrile (45:55 % v/v). Degradation products resulting from the stress studies did not interfere with the detection of diacerein. Structural elucidation of impurity was carried out by LC-MS, 1H NMR and IR spectroscopy. The isolated impurity was characterized as 5-acetoxy-4-hydroxy-9, 10-dioxo-9, 10-dihydroanthracene-2-carboxylic acid. An understanding of the different parts of the molecule that are susceptible to degradation can help in the designing of more stable analogs.