Entry in progress—B.P.
 
Wikipedia: Dive bar
A dive bar, or simply a dive, is a downmarket drinking establishment serving a working class (or poorer) clientele.
 
The term “dive” dates from the London of the 19th century when younger men wanted somewhere slightly more risqué to spend their afternoons than the great clubs frequented by their fathers. They formed more informal clubs where they smoked and drank coffee.
 
The Shorter Oxford Dictionary indicates that in the U.S in the 1880s, it referred to an illegal drinking den or place of low repute, especially in a cellar or similar place. It has also been used to refer to opium dens. More recently, in Canada at least, it is associated with cheap and dirty accommodation (such as fleabag motels and run-down rooming), as well as with prostitution and other disreputable or illegal activities.
 
(Historical Dictionary of American Slang)
dive n. [cf. DIVING-BELL; poss. a back formation fr. diver in 1785 quot.]
1. a filthy cellar apartment, esp. a drinking den; (hence) a filthy or disreputable resort of any kind; DUMP.
[*1785 Grosse Vulgar Tonuge: Diver. One who lives in a cellar.]
1867 Nat. Police Gaz. (Jan. 12) 4: This “moll” keeps a “dive” on Plumb street, in “Nigger Row.” The inhabitants of this place being both white and black of the lowest class.
1867 Nat. Police Gaz. (Oct. 26) 3: Clara Hudson’s “dive” at No. 463 South Clark street, was emptied of its inmates.
1871 in OEDS: One of the gayly decorated dives where young ladies…dispense refreshment to thirsty souls.
1872 Crapsey Nether Side 159: Let me explain that in detective parlance every food place is a “dive,” whether it be a cellar or garret, or neither.
1873 in H.N. Smith Popular Culture 202: The Sanitary Inspectors…have commenced a goo work in cleaning out the vile under-ground dens—“dives,” in the slang of the street—in which hundreds and thousands of the lower classes…herd together in filth and squalor too dreadful to be described.
1875 Lloyd Lights and Shades in S.F. 124: The low-dives are thronged with cut-throats and ruffians.
1884 Triplett American Crimes 63: A dive is a low drinking den.
1887 “Bunny” Cow Boy 23: We visited the various saloons and “dives,” the name given to a sort of “cafe chantant” built under the ground, and where there is much drinking and dancing going on.
2. a speakeasy, nightclub, or similar establishment. [Orig. ironic.]
1930-31 Farrell Grandeur 140: It would be…an exclusive dive whose members would be all filthy with dough.
1934 Appel Brain Guy 140: And now a regular dive where a feller could drink his beer or play cards or line up a dame.
1951 J. Reach My Friend Irma 28: What Automat? This was a very ritzy dive. 
   
(Oxford English Dictionary)
dive, n.
colloq. (orig. U.S.) An illegal drinking-den, or other disreputable place of resort, often situated in a cellar, basement, or other half-concealed place, into which frequenters may ‘dive’ without observation.
1871 N.Y. Herald 6 July 8/2 One of the gayly decorated dives where young ladies..dispense refreshments to thirsty souls.
1882 Society 11 Nov. 7/2 The proprietor of a New York ‘dive’.
1883 H. H. KANE in Harper’s Mag. Nov. 945/1 Those who frequent the opium-smoking dives.
1885 Referee 10 May 3/3 A grand entrance takes the place of the tavern, which is relegated to down below, and is called a ‘dive’.
1886 E. W. GILLIAM in N. Amer. Rev. July 33 There are 150 gambling dives, the approaches to which are so barricaded as to defy police detection.
1887 Boston Jrnl. 24 Apr. 2/4 Ordinary saloons and unlicensed dives did a rushing trade.
1892 STEVENSON & OSBOURNE Wrecker viii, I visited Chinese and Mexican gambling-hells, German secret societies, sailors’ boarding-houses, and ‘dives’ of every complexion of the disreputable and dangerous.
1897 Daily News 17 Apr. 3/1 From highway into byway they go; now up into tottering garret, then down into dim dive.
1910 Westm. Gaz. 25 Jan. 4/1 This dingy ‘dive’ can boast of many glorious memories.
1940 AUDEN Another Time 112, I sit in one of the dives On Fifty-Second Street.
1958 Spectator 4 July 8/3 The degenerate dives of Berlin.
 
The Stranger in Ireland:
Or, a tour in the southern and western part of that country in the year 1805
by John Carr
Philadelphia, PA: Samuel F. Bradford
1806
Pg. 167:
...at those subterranean tables d’hotes in the diving cellars of St. Giles’s, in London…
 
Google Books
April 1832, Edinburgh Review, pg. 212:
It was as if a man, vexed at having dined at three guineas a-head in a fashionable hotel, should make up for it next day by plunging into a twopenny diving cellar.
 
Google Books
The City in Slang:
New York Life and Popular Speech
By Irving L. Allen
New York, NY: Oxford University Press US
1993
Pg. 146:
Dive, as its meaning evolved, first specified a drinking place in a basement and came to mean any socially low-down place, regardless of its physical level. Dive in this sense seems to have originated in American English by the late 1860s, quite possibly in New York, for a drinking place located a flight down from street level. In 1869 the pseudonymous George Ellington in The Women of New York wrote of young prostitutes “in such company as grace Chatham Street ‘dives.” The term probably was in used by the mid or even early 1860s. In 1872, George Crapsey in The Nether Side of New York also used it in inverted commas, which suggests that it was still considered new: “And here let me explain that in detective parlance every (Pg 148—ed.) foul place is a ‘dive,’ whether it be a cellar or garret, or neither.” Wentworth and Flexner’s Dictionary of American Slang summarized that a dive is “a disreputable, heap, low-class establishment or public place, esp[ecially] a bar, dance-hall, nightclub or the like, a place of bad repute.” The OED defines dive in the U.S. as “an illegal drinking-den, or other disreputable place of resort, often situated in a cellar, basement, or other half-concealed place, into which frequenters may ‘dive’ without observation.”
 
Key in the notion of a dive is its physical as well as its social lowness. Dive in its subterranean senses is nascent in descriptions in New York in the 1840s and 1850s and reflected the arrangmenet, uses, and the social meaning of local architecture. Manhattan townhouse architecture, influenced by the Dutch colonists, usually had a ground floor half a flight down from street level and a parlor floor at the top of a high stoop. When commercial activity invaded residential neighborhoods in the rapidly changing city, the ground floor of former private family houses was often given over to a restaurant or drinking place, often a so-called oyster cellar or, more euphemistically, oyster saloon. High elevation in “tall” buildings meant privacy and hihg status; street-level space was associated with semi-public, usually respectable commercial establishments. Low commercial activities, such as dives, were in basements below the street level into which one “dived,” and not usually for oysters. But, as Crapsey wrote, a dive would be any foul place, regardless of its elevation.