Proctor says this horrifying line after he has seen the awful power that Abigail, "a whore" (to use his word), has over Danforth and the court, after his wife, Elizabeth, has lied to save his name (making it appear that he was lying when he explained Abigail's ulterior motives for accusing Elizabeth), and after Mary Warren, his servant who he brought to the court to confess that the girls were actually "sportin'" when they made accusations, has turned on him and told the court that Proctor is "the Devil's man."
When Proctor says that "God is dead," he means that God is no longer the ruling force in Salem anymore. The Devil is now in charge, and he is working through these lying girls and this corrupt court to take innocent victims. Further, Proctor says,
A fire, a fire is burning! I hear the boot of Lucifer, I see his filthy face! And it is my face, and yours, Danforth! For them that quail now when you know in all your black hearts that this be fraud-- God damns our kind especially, and we will burn, we will burn together!
Not only is the Devil, then, working through the girls and Danforth, but also through men like Proctor (and even, perhaps, Hale), men who knew (or suspected) early on that it was not witchcraft but spite and greed at the root of these accusations, and said nothing. They have all welcomed the Devil in, and he lives now in Salem, not God.