Flow instability such as rotating stall and even surge occurs when the centrifugal compressor stage operates under low flow conditions. This phenomenon is an extremely complex dynamic process, and it is closely related to the aerodynamic performance and internal flow of the stage. Therefore, it is necessary to study the flow development characteristics in the stage. This paper employs experimental measurement and full-annulus numerical simulation to investigate the effects of diffuser stall on the aerodynamic performance of the compressor and the internal flow of the impeller. The propagation direction, speed, evolution characteristics, and the number of the stall cell were obtained by experimental measurement, and the numerical simulation method was verified. The numerical results that there is a stall limit cycle with counter-clockwise rotation between the flow rate and total pressure ratio of the compressor when the diffuser stalls. Meanwhile, it is found that the stall limit cycle is closely related to the separation strength of the internal flow in the compressor. Finally, the coherent flow structure near the vane shroud side is identified by the modal decomposition methods when the diffuser stalls. The research results in this paper promote an in-depth understanding of the stall mechanism of centrifugal compressors.