We have investigated the high-pressure properties of the molecular crystal para-diiodobenzene, by combining optical absorption, reflectance, and Raman experiments with Car-Parrinello simulations. The optical absorption edge exhibits a large red shift from 4 eV at ambient conditions to about 2 eV near 30 GPa. Reflectance measurements up to 80 GPa indicate a redistribution of oscillator strength toward the near-infrared. The calculations, which describe correctly the two known molecular crystal phases at ambient pressure, predict a nonmolecular metallic phase, stable at high pressure. This high-density phase is characterized by an extended three-dimensional network, in which chemically bound iodine atoms form layers connected by hydrocarbon bridges. Experimentally, Raman spectra of samples recovered after compression show vibrational modes of elemental solid iodine. This result points to a pressure-induced molecular dissociation process which leads to the formation of domains of iodine and disordered carbon.