Demon possession is one of the oldest traditions of demons and witchcraft. There’s plenty of story, encounter, and roleplaying potential with possessing fiends. A demon can possess and curse a player without its knowledge, or it can whisper evil thoughts in the player’s ear and seize control at a pivotal moment, or it can be a powerful boon to evil players or players desperate for a taste of strength

Any fiend or incorporeal undead with a CR higher than 4 and CHA higher than 13 can gain the ability to possess creatures or objects. To do so, the demon projects itself into the ethereal plane, leaving its corporeal form behind, usually in a safe place.

It then wanders until it finds something or someone to possess and enter its space, if possible. The creature must make a CHA saving throw against a DC equal to 10 + the demon’s CHA modifier. If the demon can cast spells, the DC is instead equal to the demon’s spell save DC. If the creature fails its save the demon possesses the creature. On a successful save, the creature is immune to the demon’s possession ability for 24 hours. Objects automatically fail against possession, but demons cannot possess intelligent objects. The possession ability increases a demon’s challenge rating by 2 as they are a lot harder to deal with when they can turn your allies against you. Useful for adjusting encounters.

Demons have many, many devious options while possessing something. Most of these apply to creatures.

• The demon can see and hear everything the creature can sense. If possessing an object, it can sense everything in a 120 ft. radius, but does not have Darkvision or Bilndsight, even if it normally would.
• The demon can hide from detection spells with an Arcana check against the detector’s opposed Insight check. It can use this same check to hide from the creature it is possessing, who may be unaware it is even possessed.
• The demon is immune to all damage while possessing something. Only creatures on the ethereal plane can interact with the demon and only when it is out of its host. All damage directed at the fiend is dealt to its host instead.
• The demon can detect all surface thoughts of its host and can communicate telepathically with its host.
• The demon can grant its host a boon if it will accept it. This boon can be:
  • * +4 bonus to one of its ability scores (no max)
  • * A fly speed of 40 ft.
  • * +4 bonus to one skill.

The demon can change, grant, or remove any of these abilities unless a pact was made with the host. The pact is based on whatever both parties will agree to and is binding.

• The demon can enhance a weapon or armor it is possessing to turn it into a magic item. It can create an effect of any magic weapon or armor of Rare quality or lower. A CR 15 or higher demon can create an effect of a Very Rare quality magic weapon or armor.
• The demon can attempt to dominate its host with an opposed CHA check against the host. The demon gains a +1 bonus to its CHA check for each prior failed host check that day. If the demon succeeds, it controls the creature in its entirety but maintains its own INT, WIS, and CHA scores. It maintains control for a number of rounds equal to its CHA score + the number of consecutive successful CHA checks made by the demon that day. After this duration, the host must make another save to regain control. If the creature makes three consecutive successful saving throws, the demon cannot attempt to possess the creature for the rest of the day.
• A demon can take control of an object, turning it into an Animated Object. if the object is a medium object, use the stats for an animated suit of armor. If small, use the stats for the flying sword (but if the object doesn’t have any sharp or pointed edges it deals 1d4 base damage instead of 1d8).
• The demon can curse its host if its host doesn’t act the way it wants or if it fails to dominate the creature. This ability can create any curse the DM warrants, as long as it is similar in severity to those outlined in Bestow Curse. A demon possessing an object can cause it to corrupt whoever it touches with a Bestow Curse spell, as well, but the creature may make a WIS save DC 10 + the demon’s CHA modifier to resist the effect.

• Dispel Evil and Good or Banishment spell will oust the possessing demon.
• Casting Dispel Magic on the fiend’s dormant body will force the demon’s ethereal projection to return to its original body.
• An ethereal demon still cannot pass through a Magic Circle programmed against it.
• Protection from Evil and Good will give a possessed creature another save with Advantage to oust the demon.

Source: https://www.tumblr.com/noblecrumpet-dorkvision/147616873922/demon-week-possession