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                                                                    Exhibit 10.7

                                                          (BLUE NILE LETTERHEAD)

December 1, 1999



Dear Diane,

On behalf of Blue Nile, Inc. (the "Company"), I am pleased to offer you the
position of CFO, reporting to Mark Vadon. The terms of your relationship with
the Company will be as indicated herein.

1.       Position. You will become CFO for the Company. As such, you will have
         responsibilities as determined by Mark Vadon.

2.       Base Salary. You will be paid a base salary of $12,500 per month, less
         payroll deductions and all required withholdings, which represents an
         annualized rate of $150,000. Your salary will be payable in accordance
         with the Company's standard payroll policies. In addition to your base
         salary, you will be eligible for an annual performance bonus. The
         performance bonus is intended to reward individual performance against
         stated objectives. The bonus for executives consists of stock options &
         cash - stock options awarded with the guidance of the board and a cash
         target of 25%. There are 2 reviews annually, January and July, with the
         bonus paid in July. Your bonus would be prorated to reflect your time
         with the company at the time of bonus payout.

3.       Stock Options. We will recommend to the Board of Directors that you be
         granted an incentive stock option to purchase 300,000 shares of common
         stock of the Company. The exercise price will be the fair market value
         of the common stock as determined by the Board of Directors on the date
         of grant (as of Dec. 1, 1999 the exercise price is $1.50 per share).
         One fourth (1/4) of the shares subject to such option will vest on the
         one-year anniversary of your hire date and one forty-eighth (1/48) of
         the shares subject to such option will vest each month thereafter as
         long as your employment continues with the Company. In the event the
         Company is acquired, an additional one-fourth (1/4) of the shares will
         vest immediately. In the event the company is acquired (acquisition,
         sale of substantially all of the assets of the company, or a merger
         whereby more than 50% of the voting power is transferred away from the
         company), and then your employment is terminated without cause within
         12 months following the acquisition date, any remaining unvested shares
         shall vest immediately upon termination. The Company's 1999 Equity
         Incentive Plan, the Grant Notice and the Stock Option Agreement shall
         govern the terms of this option grant in all respects.

                                       1.


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                                                          (BLUE NILE LETTERHEAD)


4.       Deferred Payment for Exercise. Your Stock Option Agreement will provide
         for an Early Exercise option, whereby you may elect to exercise your
         option for unvested shares. If you so elect, the Company will allow you
         to defer payment of such exercises, subject to interest payments on any
         balance deferred. Upon termination of employment, any deferred balance,
         plus associated interest, will be due. Furthermore, the company will
         maintain its right to repurchase unvested shares as specified in the
         Stock Option Agreement.

5.       Benefits. You will be eligible to receive healthcare and dental
         benefits, life and disability insurance and enrollment in the Company
         401k plan effective on the first of the month following your date of
         employment.

6.       Standard Employee Agreement. Like all employees, you will be required
         to sign the Company's standard Employee Proprietary Information and
         Inventions Agreement relating to the protection of the Company's
         proprietary and confidential information and assignment of inventions.
         In addition, you will be required to abide by the company's strict
         policy that prohibits any new employee from using or bringing with him
         or her from any previous employer any confidential information, trade
         secrets, or proprietary materials or processes of such former employer.

7.       Federal Immigration Law. For purposes of federal immigration law, you
         will be required to provide to the Company documentary evidence of your
         identity and eligibility for employment in the United States. Such
         documentation must be provided to us within three (3) business days of
         your date of hire, or our employment relationship with you may be
         terminated. Documents that can satisfy these requirements are a United
         States passport or a valid driver's license and a social security card.

8.       At-Will Employment. Your employment is at will, as defined under
         applicable law. This means you may voluntarily quit for any reason
         whatsoever simply by notifying the Company. Likewise, the Company may
         terminate your employment at any time and for any reason whatsoever
         with or without cause or advance notice. This at-will employment
         relationship cannot be changed except in a writing signed by a Company
         officer.

9.       Entire Agreement. This Agreement, together with your Employee
         Proprietary Information and Inventions Agreement, constitutes the
         entire agreement between the parties and supersedes all other
         agreements or understandings. This agreement may be amended only by
         written agreement signed by you and the Company.

                                       2.


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                                                          (Blue Nile Letterhead)


10.      Start Date. As soon as possible.

Again, let me indicate how pleased we all are to extend this offer, and how much
we look forward to working together. Please indicate your acceptance by signing
and returning the enclosed copy of this letter. This offer is valid until
December 6, 1999 and will terminate if not accepted by such date.

Very truly yours,

BLUE NILE, INC.

        /s/ Mark Vadon
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The foregoing terms and conditions are hereby accepted:

Signed:           /s/ Diane Irvine
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                      Diane Irvine

Dated:       December 6, 1999
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                                       3.