To use PayPal in the Diablo III Real Money Auction House, you must have:
Battle.net SMS Protect is a free form of account security that uses text messages to confirm certain account activities, such as recovering your password and approving transactions in the Diablo III Real Money Auction House. Learn more at the Battle.net SMS Protect FAQ.
If you need to sign up for PayPal, you will be redirected to the PayPal website to do so.
After you finish all the required steps, close your browser and return to the Diablo III game client.
* PayPal is not supported in the following currencies: Argentine Peso, Chilean Peso, Brazilian Real, Russian Ruble