Recall the basic property of a diode

A diode is a two-terminal semiconductor device with terminals called anode and cathode.

Its main property is:

• It allows current to flow in one direction (forward bias),
• and blocks current in the opposite direction (reverse bias, ideally).

Evaluate each option

Option A: "It is two terminal device which conducts current in both directions."

• This is incorrect.
• A device conducting in both directions behaves like an ordinary conductor/resistor, not a diode.

Option B: "It is two terminal device which conducts current in one direction only."

• This is correct.
• This is exactly the identifying characteristic of a diode in a multimeter test.

Option C: "It does not conduct current gives an initial deflection which decays to zero."

• This describes the behavior of a capacitor when tested, not a diode.
• Hence, incorrect.

Option D: "It is three terminal device which conducts current in one direction only between central terminal and either of the remaining two terminals"

• This describes a transistor-like three terminal device, not a diode.
• Hence, incorrect.

Final answer

Therefore, the correct option is: $\boxed{\text{B}}$

Comparison with stored correct answer

• Stored correct answer: B
• Derived answer: B
• They match.