In this paper, we propose and analyse a predator-prey model with disease in prey. We assume that a portion of healthy prey takes refuge to avoid predation. We find the biologically feasible equilibrium points and their stability criteria by using linearization technique. We also perform Hopf bifurcation analysis around the coexisting equilibrium point. We carry out extensive numerical simulation to validate our theoretical results and also explore rich dynamics which cannot be attained analytically. We draw some one and two parameter bifurcation diagrams which demonstrate rich dynamics like, Hopf bifurcation, chaos, bistability, etc. We observe that invasion of disease in prey can produce chaos through period-doubling bifurcation, whereas refuge can control chaos via period-halving bifurcation. We also observe that refuge can control disease prevalence in the prey population.