Someone that I am going to be playing with wants to play as a disguised demon (demon in human form) who has taking a liking to the chaotic nature of human society.  He likes coin and ale and how small and fragile the human women are and he likes to get into a good fight and show off his prowess - but mostly he likes how easy humans are to manipulate.

It amuses him that he can disguise himself as one of them and move amongst them, playing with their little lives, turning one against the other and then back again.

This all sounds very much like a demon and it might be fun for a few weeks but I am not sure that the gimmick would last.

Is there any way that a character like this could be made to work at all or is it just a total fail and should he be asked politely to make a new more realistic character?

That doesn't sound much like a demon. They're not exactly known for restraint or scheming, and I doubt they'd be able to resist their destructive urges for long. A succubus/incubus is probably a better fit.

Trying to roleplay a fiend has some drawbacks, though; fiends are much stronger and have many more abilities and resistances than playable racer so that's going to require DM buy-in or a lot of handwaving. Fiends are also inherently evil so your character will never evolve past its evil nature.

Have you considered playing a Yuan-Ti? They're already a playable race, consider themselves superior, and infiltrating society in disguise is how they operate.

I wouldn't have them being able to change between two forms necessarily and like the above idea of him being stuck in the human form, an alternative for the transformation is having the demon being a Fallen Aasimar but naturally with no form of redemption. It looks human until it unleashes its "demonic" form but doesn't have the strength to maintain that form. You could possibly consider switching out Celestial for Infernal as a language as well but a dark reskin is probably the easiest way to essentially represent the race on the tabletop.

The next issue would be thinking about how it will integrate in to the party scenario, as described it sounds like it could get very frustrating for the party to play around as there's a lot of "do bad things for the lolz" elements that may amuse the player himself, and maybe the rest of the party but doesn't benefit the overall game and as you were worried about the gimmick could overstay its welcome. Think about how the character would work around the others. In the past I've taken the concept of Sebastian - a character from manga/anime series Black Butler - and used him by having him involved in the pact with another party member which means while he is manipulating and pulling the strings around him, he is still subject to the whims of his "master" which reigns in his actions a little. Now unless this is preplanned by two of the players obviously you don't want to be enforcing "your demon character acts as a bodyguard towards the Halfling rogue" but it's an example of how I've used a similar idea and integrated it in to a party.

Figure out how it can work in the party dynamic and then figure out the intricacies of how you actually use the demonic elements the player wants. You might be able to come across something that works okay.

Thanks guys, I talked to the player and worked out a compromise.  Instead of being a demon, he is going to be a powerful fiend in human form.  We are still working out a backstory for him that can fit into the game but basically, he angered one of the demon lords and in an attempt to hide he turned himself into a human.  Something went wrong during the transformation though and he doesn't remember who he really is.

So he has all these awesome fiendish powers but he doesn't know that he has them or how to use them anymore.  Despite not knowing his true identity he subconscious still seeps through to some degree and manifests itself as his lust for coin, ale and women and his desire to get into a good fight.  He isn't going to be outright evil but he isn't apposed to doing evil acts to get what he wants either. 

So that makes more calculating and manipulative than just the bog standard, doing evil for the lolz type of character.

I have decided that this guy is going to basically be using the party for his own ends (but they wont know it till close to the end of the campaign when his true fiendish nature is revealed and he becomes the big bad for the final fight).  I am going to also drop plot hooks that could lead this character recovering some of his memories and powers so that when it comes to the final fight, he is going to be a worthy foe for the remainder of the party.

The player is fine with being the bad guy and that's apparently the kind of character he had in mind anyway when he created the demon/human one but obviously the rest of the party isnt going to find out what we have planned until the end of the campaign.

I am just really hoping that this goes well now because although I am a long time rper and have been a GM for other games (some loosely based on d&d - this is really my first time as a DM for full blown d&d campaign.  So I am hoping I don't screw this up and make a terrible adventure for my players.

Use the rules for tieflings so that everything is still balanced within the game.

Have you given the other players in some ways a balancing storyline and/or set up something down the line that will allow them to feel as "epic" as the fiend-players PC? If the PC is actually going to be the final boss to fight, should the other PCs balance that? The typical epic fantasy story is the chosen one. Are there a few chosen ones? A prophecy that as the campaign goes on points out all the PCs (but one)?

It's a tough balance you're striving for and players being players, it might be hard to get the feeling you both might be hoping for without railroading everyone. 

That's a good point and I had planned on spending some one on one time with the other players as well.  Explaining that this was going to be an epic adventure, telling them something about the story without really giving anything away and helping them build their characters if they wanted help with that.

I don't mean like telling them what characters to make but rather helping them weave their characters into the world as obviously, I am the one who controls the world so like by having them tell me what kind of character they want and helping them with their backstory. I should be able to drop story references and plot hooks that will enable them to get epic vibes as well - stuff like the prophecy you mentioned and that kind of thing.

After that I planned on doing a session 0 where we just set out the house rules, get to know each others characters and layout the first part of the story.

From there we could jump right into the action at our first play session the following week.

Hopp it works out. Toguh to get right but can be really cool. Post some updates on how it goes!