In May 1984, Mercyful Fate returned to Easy Sound Studios with producer Henrik Lund for the recording of their second full-length album. Once again, Henrik asked the band to stay outside the studio until he was done, but this time, the band refused and came in anyway; they just didn't care if he liked it or not. Having everyone there came in handy, though, because there was a lot of production stuff on that album where they had to change reverbs and echoes, stuff like that. There was a lot to do with the vocals too, because there were no automated mixing boards at that time; everything was so manual, so it was a lot more difficult to mix back then.

It's finally on August 10th 1984 that was released the album "Don't Break The Oath", which had to become another heavy metal classic album. The response to the album was phenomenal as the reviews were unanimous saying they had surpassed themselves again. Soon after its U.S. release on Combat Records, the album became the first underground metal album to reach the Bubbling Under section of the prestigious Billboard magazine album chart; it came in at #202, just two slots of making the Top 200.

Many songs on the album previously appeared on some of the band's earlier demos, sometimes under different titles, with different lyrics and arrangements. Some of them were actually written even before the "Melissa" was done, such as "Come To The Sabbath" among others. That song, as well as "The Oath" were ready by the time the band did the "Melissa" album, but they prefered keeping it for the following album; sometimes the band ended up in fights over whose songs were going on the album, because everybody wanted their own songs on the album, of course. Another song that was written for a while and ended on this album was "A Dangerous Meeting", which was originally called "Walking Back To Hell", and then retitled "Death Kiss".

Lyrically, the song "Nightmare" is pretty intriguing as it describes a dream King previously had a few years before. It was rather nasty: he dreamed he saw a big black book and a picture of a strange lady on the back, and as he looked, she suddenly came to life. He tried screaming for help to his brother who shared the same bedroom at the time, but no sound came out. The mysterious lady beckoned him to follow her, and he felt compelled to do so. He then found himself in the center of a coven of thirteen hooded, shadowy figures, all of whom were pointing at him saying "You are living on borrowed time". King woke up in real sweat as it was a truly horrifying nightmare. Also, according to some, the song "Gypsy", which was featured on "Don't Break The Oath" too, would be autobiographical for King.

Shortly after the release of the album, the band fired co-manager John Kibble as they discovered that he recorded their gigs and sold the tapes falselly pretending these were real albums, which pissed off the band due to the lack of quality of these recordings. The authorities found it and destroyed the whole lot, which represented around 5,000 to 10,000 copies. Most of the early bootlegs of the band were actually recorded by him. From now on, Mercyful Fate became self managed with the help of Olé Bang, a friend of the band who was involved with them since the very beginning. Olé first met Hank on his way back to Copenhagen, coming back from a Judas Priest concert in Hamburg, Germany. Olé went to the show taking photographs, and Hank, who was playing with Brats at the time, saw Olé's cameras and equipment and asked if he could come around his rehearsal room and take some shots of his band. They kept in touch and Olé was working with the band since then.

In the following month of October, some American promotors were finally convinced to book the band for an American tour as they gained always more and more success over there. The initial plan was to do 15 shows in 3 weeks, but as the ticket sales far surpassed expectations, the tour was extended for 19 additional dates. Mercyful Fate headlined their own club tour, then opened for Motörhead on a trek through theatres. The band headed to the USA on October 18th, as their first show was scheduled two days later in Portland, Oregon. On the October 26th, the band was performing in San Francisco, California. That night, as the band was supposed to get onstage, Hank was still asleep in his motel room. The American tour manager called him up, and Hank felt so bad and tired, so he took his stage clothes and just walked down the street. There was a kind of a new place, and when he went to the place, he couldn't get the way in, finding out where he should go in. It was a big mess, but however, the show turned out right, in addition that their friends of Metallica joined them on stage for a jam during that same evening. The American Tour then ended on December 16th in Providence, Rhode Island. Further dates in Norfolk and Pittsburg were cancelled as local promotors were pressured by religious groups to ban the group from perforing as Mercyful Fate's reputation had actually preceeded them. The band even landed on the front cover of the biggest news papers in America, USA Today and The Globe, stating in a headline "Satanic rockers threaten our kids". The American Tour was now completed with success, but some frictions within the band began to arise regarding the musical direction the band had to take after that. A rift had sprouted between Hank and the other members, leading to the fabled reports of Hank wearing pink sweatsuits onstage while his bandmates still prowled the boards in black leather and spikes; it seemed like if he didn't know where he stood all of a sudden. Anyway, the band then came back home for a well-deserved Christmas break, but pretty short as they were booked to appear on the German Christmas Metal Meeting Tour, which lasted from December 26th through December 30th. The bill also comprised of Motörhead, Helix, Girlschool and Talon.

In the beginning of 1985, the band was preparing material for their next album. At the end of February, Hank stopped by King's apartment to play him a tape of riffs and ideas he prepared for the upcoming album. King also had 5 tracks ready which were a direct continuation of the style displayed on the previous albums. However, the material Hank had was in a completely different direction as it was much softer and even funky in certain places. Hank was a big-time joker, and King thought it was a practical joke that he recorded a couple of these songs and presented them to the band, unless until he found out that Hank was serious. At this time, he suddenly wanted to try a lot of other stuff as he was listening to a lot of funk and it inspired him to write some stuff that completely shocked King, and also Michael, and it became obvious to King that mixing these two styles would never work on a Mercyful Fate album. Neither Hank and King wanted to compromise, and this situation left King with only one sensible choice; leaving Mercyful Fate and starting a band of his own. However, for the next month, he kept his decision a secret from the rest of the band while laying out plans for a future on his own. In the meanwhile, Michael and Timi were hanging out with a drummer called Mikkey Dee, who was playing with a band called Geisha. King have heard he was a very good drummer, and went to Mikkey, telling him he would soon break-up Mercyful Fate and start a new band. He asked him if he would like to come with him. Mikkey thought it was an interesting challenge and accepted. Mikkey also talked about it to his friend Pete Blakk, but Pete wasn't interested at this time. Then on April 11th 1985, the band performed what had to become their last show at The Saga Theatre, in Copenhagen. The day after the show, King called up the other members and told them of his decision to leave the band. The next day, it became official; Mercyful Fate was no more. At this point, the band was supposed to go touring Germany in the following days, so, of course, the planned tour was then cancelled due to the break-up.

Even after its demise, Mercyful Fate was still causing controversy as in the summer of 1985, an organization, formed by American senator's wives, called the P.M.R.C. (The Parents Music Resource Center) published the infamous Filthy Fifteen List. This was a list of the fifteen songs that the P.M.R.C. considered the most harmful for young people. Among others, such as Black Sabbath, Judas Priest and W.A.S.P., there was also Mercyful Fate on this list, regarding the song "Into The Coven". The P.M.R.C., by way of their political connections, managed to have a Senate hearing arranged later that year. It would prove to be the initiative that would later lead to the current American policy for the use of warning-stickers on albums that features what some people might consider as explicit lyrics.

Now that the band was no more existing, Hank went on his side forming his new band called Fate, along with drummer Bob Lance. Bob previously was asked to join Mercyful Fate in the early days, but refused as he was already playing in a band, a progressive band with whom he was happy back then, so Mercyful Fate did choose Kim Ruzz instead at this time. At a certain point, Michael Denner was supposed to play on the Fate album too, but however it never happened. King, on his side, started on a new band simply called King Diamond; it seemed logical to name the new band after him, this giving it an instant identity with the Mercyful Fate fan base. In this new band, not only King brought with him the style that Mercyful Fate had, but also two of its members: guitarist Michael Denner and bassist Timi Hansen. The other remaining member, drummer Kim Ruzz, decided to call it quits for the musical scene as he was not asked to follow King because Michael did not get along with him at all; they even had a fist fight on tour. King once had a fight with him too, on the street in front of King's apartment, in Copenhagen. Kim lived for some years in the USA, working as a postman, but then he moved back to Denmark a few years later. He then still played drums but kept away from the music industry. Now on his own, King was looking for two additional members to complete the line-up of his new band, as he needed a second guitarist as well as a drummer. Then, as it was already planned, Mikkey Dee entered the band, bringing with him guitarist Floyd Constantine, who also played with him in Geisha.