Sharon Arden, (later Sharon Osbourne) daughter of Black Sabbath manager Don Arden, suggested former Rainbow vocalist Ronnie James Dio to replace Ozzy Osbourne in 1979. Dio officially joined in June, and the band began writing their next album. With a notably different vocal style from Osbourne's, Dio's addition to the band marked a change in Black Sabbath's sound. "They were totally different altogether", Iommi explains. "Not only voice-wise, but attitude-wise. Ozzy was a great showman, but when Dio came in, it was a different attitude, a different voice and a different musical approach, as far as vocals. Dio would sing across the riff, whereas Ozzy would follow the riff, like in "Iron Man". Ronnie came in and gave us another angle on writing."
Geezer Butler temporarily left the band in September 1979, and was initially replaced by Geoff Nicholls of Quartz on bass. The new lineup returned to Criteria Studios in November to begin recording work, with Butler returning to the band in January 1980, and Nicholls moving to keyboards. Produced by Martin Birch, Heaven and Hell, was released on 25 April 1980, to critical acclaim. Over a decade after its release AllMusic said the album was "one of Sabbath's finest records, the band sounds reborn and re-energised throughout". Heaven and Hell peaked at number 9 in the UK, and number 28 in the US, the band's highest charting album since Sabotage. The album eventually sold a million copies in the US, and the band embarked on an extensive world tour, making their first live appearance with Dio in Germany on April 17, 1980.
Black Sabbath toured the US throughout 1980 with Blue Öyster Cult on the "Black and Blue" tour, with a show at Nassau Coliseum in Uniondale, New York filmed and released theatrically in 1981 as Black and Blue. On 26 July 1980, the band played to 75,000 fans at a sold-out Memorial Coliseum in Los Angeles with Journey, Cheap Trick, and Molly Hatchet. The next day, the band appeared at the 1980 Day on the Green at Oakland Coliseum. While on tour, Black Sabbath's former label in England issued a live album culled from a seven-year old performance, entitled Live at Last without any input from the band. The album reached number five on the British charts, and saw the re-release of "Paranoid" as a single, which reached the top 20.
Vocalist Ronnie James Dio
On 18 August 1980, after a show in Minneapolis, Minnesota, Bill Ward was fired from Black Sabbath. "I was sinking very quickly", Ward later said. "I was an unbelievable drunk, I was drunk twenty-four hours a day. When I went on stage, the stage wasn't so bright. It felt like I was dying inside. The live show seemed so bare, Ron was out there doing his thing and I just went 'It's gone'. I like Ronnie, but musically, he just wasn't for me." Concerned with Ward's declining health, Iommi brought in drummer Vinny Appice, without informing Ward. "They didn't talk to me, they booted me from my chair and I wasn't told about that. I knew they'd have to bring in a drummer to save the (tour), but I'd been with the band for years and years, since we were kids. And then Vinny was playing and it was like 'What the fuck?' It hurt a lot."
The band completed the Heaven and Hell world tour in February 1981, and returned to the studio to begin work on their next album. Black Sabbath's second studio album produced by Martin Birch and featuring Ronnie James Dio as vocalist, Mob Rules was released in October 1981, to be well received by fans, but less so by the critics. Rolling Stone reviewer J. D. Considine gave the album one star, claiming "Mob Rules finds the band as dull-witted and flatulent as ever". Like most of the band's earlier work, time helped to improve the opinions of the music press, a decade after its release, AllMusic's Eduardo Rivadavia called Mob Rules "a magnificent record". The album was certified gold, and reached the top 20 on the UK charts. The album's title track "The Mob Rules", which was recorded at John Lennon's old house in England, also featured in the 1981 animated film Heavy Metal, although the film version is an alternate take, and differs from the album version.
Unhappy with the quality of 1980's Live at Last, the band recorded another live album—titled Live Evil—during the Mob Rules world tour, across the United States in Dallas, San Antonio, and Seattle, in 1982. During the mixing process for the album, Iommi and Butler had a falling out with Dio. Iommi and Butler accused Dio of sneaking into the studio at night to raise the volume of his vocals. In addition, Dio was not satisfied with the pictures of him in the artwork. "Ronnie wanted more say in things," Iommi said. "And Geezer would get upset with him and that is where the rot set in. Live Evil is when it all fell apart. Ronnie wanted to do more of his own thing, and the engineer we were using at the time in the studio didn't know what to do, because Ronnie was telling him one thing and we were telling him another. At the end of the day, we just said, 'That's it, the band is over'". "When it comes time for the vocal, nobody tells me what to do. Nobody! Because they're not as good as me, so I do what I want to do," Dio later said. "I refuse to listen to Live Evil, because there are too many problems. If you look at the credits, the vocals and drums are listed off to the side. Open up the album and see how many pictures there are of Tony, and how many there are of me and Vinny".
Ronnie James Dio left Black Sabbath in November 1982 to start his own band, and took drummer Vinny Appice with him. Live Evil was released in January 1983, but was overshadowed by Ozzy Osbourne's Speak of the Devil, a platinum selling live album that contained only Black Sabbath songs, released five months earlier.