Unlocking this achievement will also unlock the Tiefling race.
The required quest triggered for me while hanging out in the Alluris Tavern, but I hear it can also pop in Bradford.
While hanging out in the tavern you'll be approached by a robed guy that ends up dying as he hands you a letter. Apparently his daughter was kidnapped and he wants someone to save her. You learn that he was a demon and can choose not to help, but if you want the achievement we're going to help!
Go to the mountains and eventually you'll encounter a stone that points the way to the lair of the monster that kidnapped the baby demon. You'll have to kill the monster and choose to save the baby. Adopt the baby and you'll unlock the achievement and race.
It's worth noting that once I did this quest as a Fairy and I had the option to fly into the second story of the lair and kill the demon by pushing him to his death. I did this and saved the baby, but I did not get the option to adopt her so I did not get the achievement. I'm assuming this was because I chose to fly in rather than the normal method.