The chancellor is the member of the council who advises on matters of diplomacy. The position is traditionally considered the highest on the council. The position of chancellor is available to those vassals and courtiers who are male, over 16 years old, not a prisoner, and not incapable.
Chancellors are given a small monthly salary and a monthly prestige bonus, and upon appointment the chancellor will gain a +15 opinion boost towards his liege. Characters with a high diplomacy stat are preferred for this position. Chancellors can be tasked to do three things: improve relations, fabricate claims, and sow dissent.
Improve Diplomatic Relations - the chancellor is sent to the court of another ruler to improve diplomatic relations between that ruler, and the chancellor's liege. A higher diplomacy makes improved diplomatic relations more likely. There is a small chance that diplomatic relations can be worsened by the chancellor's attempts, especially if the chancellor has a low diplomacy.
Fabricate Claims - the chancellor is sent to a particular county to fabricate a claim on that county for his liege. A higer diplomacy makes the fabrication of a claim more likely. Particularly skilled chancellors may fabricate a claim on the entire duchy instead. The fabricated claims are strong, and are not inheritable unless pressed in war. There is a small chance the holder of the title will find out about the fabrication attempt and be infuriated, worsening relations.
Sow Dissent - the chancellor is sent to the court of another ruler to sow dissent between that ruler and his or her liege. A higher diplomacy makes the sowing of dissent more likely. If the chancellor succeeds, the relations between the ruler and his or liege will be worsened. There is a small chance the chancellor's attempts will be uncovered, and the targeted ruler's opinion of the chancellor's liege will fall.
The chancellor of a Muslim ruler is instead known as a Grand Vizier. Similarly, the chancellor of a Byzantine ruler is known as a Magistros.