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The difficulty levels in Path of Exile are, in order of increasing difficulty:

  1. Hard
  2. Cruel
  3. Merciless

A new character must start in the lowest difficulty (Hard), and may only progress to next difficulty after completing the main quest in that difficulty. The character retains all experience and items when progressing to a higher difficulty, and starts back at the beginning of the game. Each difficulty is suited to characters of higher level than the last, and features tougher monsters, better loot, and increased death penalties.