We stay at this hostal every time we visit Nerja now as it is well located in the centre of the old town (about 10 mins walk from the bus stop and 5 mins from the main free car park). The ladies in Reception are always very welcoming and helpful with info if required. Rooms are very clean and have aircon. Nerja gets quite busy in the summer months so advisable to book ahead in any of the hostals as they do seem to get full quickly.
I would recommend Haveli (Indian Restaurant in old town centre) food is fab (I know - not very spanish) and also the fish restaurants on Burriana Beach for the paella or sardines.

I have spent 1 night in Hostal Dianes. I was told that the price was E 18 per night including breakfast (this is mentioned at the doorpost as well). The next morning while checking out I had to pay E 20 and NO breakfast......Furthermore the room was icy-cold.

There are not too many reasonably priced hotels in Nerja. Either you stay at a resort or at a hostel. This place was the only one available on Expedia that had air conditioning, so we took it.

The room was comfortable enough, but the air conditioning was very weak. In the middle of a heat wave, that was an issue. The air conditioner also spit out ice crystals so we had to move our things away from the table under the unit.

Our second night, we had very noisy young adult neighbours upstairs returning from a night out. Because there is no overnight manager, there was no one to complain to. So, at 3am, my poor sick husband and I went upstairs and knocked on their door. No one answered, but the noise quietened down! I would have preferred a hotel where there is a night manager to handle any such issues.

We stayed here for 6 nights in September 2008. We were in Nerja for a friend's wedding and many of us stayed in different locations around Nerja. This was a fine base for us. Very clean and the staff were very helpful. There is a lovely roof top terrace but you wouldnt' stay up there too long during the day as it is very warm. The only draw back we found was that it was quite noisy from other residents coming and going especially during the night. You could hear a lot and this was very annoying. Other than that the location was ideal and very central, only a short walk to the Balcon and the beaches. Nerja is a beautiful spot and we will definitely return to this area.