Neil Gaiman described his concept for Season of Mists, the Sandman story which introduces Lucifer as a major character, in these terms:
The story was inspired loosely by something the Abbé Mugnier had once said - that he believed that there was a Hell, because it was church doctrine that there was a hell. He was not required to believe that there was anyone in it. The vision of an empty hell was one that fascinated me.
Very well; Hell would be empty, abandoned by Lucifer (whom I represented as a fallen angel, straight out of Milton), and as prime psychic real estate would be wanted by various factions.
(Speech to the Chicago Humanities Festival in 1998, published in Columbia: A Journal of Literature and Art no. 31 in 1999, and collected in The View from the Cheap Seats, an anthology of Gaiman's non-fiction writing published in 2016.)
Lucifer made a brief appearance in the first Sandman story but this is the tale which gave him the characterization that persisted. Some particular points of contact with Milton's Satan include:
- Lucifer directly quotes "Better to reign in hell than serve in heaven" (Season of Mists 1:20, Paradise Lost 1:263) and attributes it, accurately, to John Milton. Unlike other portrayals of Satan, such as Dante's mute prisoner, this is Lucifer as the king of Hell, reigning in power.
- In Season of Mists 2:15, "We fell, my comrades in arms and I. We fell so far... so long... and after an eternity of falling we came to rest in this place. And I knew then that there was no way that I would ever return to paradise..." recalls Milton's "Him the Almighty Power/Hurled headlong flaming from th'ethereal sky,/With hideous ruin and combustion,down/To bottomless perdition" (1:44-47) and parallel accounts elsewhere in the poem.
- The brief recounting of the war in Heaven on the same page is compatible with the account in Milton - no specific citation since there are allusions throughout Paradise Lost, but the point is that there was an armed rebellion and Satan lost very decisively. The idea that Lucifer/Samael was the most powerful angel, described by Dream to Matthew in Season of Mists 1:8, appears in Milton as "he of the first/If not the first Arch-Angel, great in power,/In favour and pre-eminence" (5:659-661).
- Lucifer's title "first among the fallen" recalls Milton's "Who first broke peace in Heaven" (2:690), "who first seduced them to that foul revolt" (1:33), "first/that practiced falsehood" (4:120-121), "first in flight from pain" (4:918), etc.
- The contending demons in Season of Mists 3:16 are somewhat reminiscent of those in Milton's poem, books 1 and 2, as they try to persuade their compatriots on a course of action.
- Dream's entry to Hell in Season of Mists 2:3, "There is a wind that blows between the worlds. A cold wind. It screams silently through the empty places, the nothing wind, traveling from nowhere to nowhere, in the uncreated wastes. I am so cold." is reminiscent of Satan's journey through the Abyss in the other direction in Paradise Lost 2:890-1055. Milton's Hell is bordered by Chaos, "the womb of Nature and perhaps her grave" (911), through which Satan flies "with difficulty and labour hard" (1021), with winds and currents buffeting him in all directions.
- The key to Hell about which the story revolves is also in Paradise Lost 2:850-879. There, we learn that "not all the Stygian Powers/could once have moved" Hell's gate, but the key unfastens every bolt and bar. In Sandman, none of the assembled deities are able to claim the vacant Hell without having the key.
- Charles Rowland in Season of Mists 4:23 avers "I think Hell's something you carry around with you. Not somewhere you go." Milton's Satan says "Which way I fly is Hell/Myself am Hell" in 4:75.
- The visual portrayal of Lucifer is a handsome man with large bat wings, in contrast to other demons who are uniformly monstrous. This recalls the imagery in the famous Milton illustrations by Gustave Doré, which postdate Milton himself but are part of the received version of "Milton's Satan".
- Generally speaking, Gaiman's Lucifer has a kind of charismatic nobility. This is founded in Milton, but perhaps owes more to the later reception of Milton by William Blake, Percy Shelley, etc., who found his Satan to be a kind of tragic anti-hero, portrayed attractively.
- The use of Cain as Dream's messenger cements the connection, as the story of Cain and Abel is prefigured in Paradise Lost 11:429-460. This helps the reader to connect Lucifer with the underlying Biblical narrative, rather than his being a fantasy demon unmoored from any specific mythology.
In construction of the story, one of Gaiman's objectives (described in the speech excerpted above) was to pile up many real-world mythologies and see what happened. We see Odin, Bast, faeries, angels, demons, a cardboard box, etc., all contending for the key to Hell. Having decided that the story would be about that, Gaiman selected his Lucifer to be not any generic devil, but the version made famous by Milton. It is a pre-existing mythology which Gaiman intends to explore and deconstruct. Plus, it saves a bit of world-building effort, as readers will be broadly familiar with the idea of the fallen angel, and aids in giving the story an epic scope.
It also makes sense in the narrative for him to be the powerful king of Hell, as opposed to a prisoner there, or the wandering trickster of folklore. His critical decision to abandon his reign is a development that requires the character to have a certain power, agency, and sense of purpose. That would not work if he were conceived as a fellow-prisoner or as a wandering malevolent presence.