Kagrenzel is a Dwarven Ruin located north of Riften and southeast of Mzulft.
You can get to Kagrenzel by taking an unmarked path that starts due east behind the tower of Ansilvund. When you approach this Dwemer structure, you will find the entrance on the rear wall. Inside the gilded doors waits a vaulted hall shrouded in darkness. As you make your way to the center of the room a large glowing orb will appear on a stone pedestal, surrounded by the bodies of unfortunate bandits.
Touching the orb causes a Dwemer cage to ensnare you as the orb rotates around the outside several times, shrieking until the the floor gives away. As you plummet hundreds of feet below the surface of Skyrim you will be able to guide your fall. If do this well, you will survive by landing in a deep pool of water littered with bones of a mammoth.
Swimming directly down from where you landed in the pool will reveal a locked Dwemer chest.
There is a tunnel near the edge of the pool. As you climb out of the water, you will notice a stone bridge with a large bonfire burning on the corner. Head up the tunnel to find Moonstone Ore deposits and several Falmer. A good strategy is to employ invisibility potions and to hide in the shadows of the large bonfire/brazier, waiting for groups of Falmer to pass. Next to it you will find a Dwemer chest.
Before you exit from Kagrenzel, you will come across a waterfall with a Falmer chest next to it. Climbing up behind the waterfall, you will find a Centurion Dynamo Core. Atop the archway leading to Stony Creek Cave is a flawless diamond – it is easily visible after you grab the dynamo. Continue through the arch and down the tunnel, and you will end up in Stony Creek Cave.
Kagrenzel is also reachable when entering from Stony Creek Cave. When you reach the end of Stony Creek Cave (the area with the waterfall and moonstone ore) you can use your Whirlwind Sprint shout from a nearby rock to get on top of the waterfall. This is a faster way to reach Kagrenzel, but you’ll miss out on a thrilling plummet. Note that the area with the glowing orb is not reachable if you enter from this way.