In recent years, carbon and carbon-based nanomaterials have received increasing attention for applications in life sciences. Nanodiamond (ND) stands out as a unique new substance in these applications because it holds several momentous properties such as good biocompatibility, excellent photostability and facile surface functionalizability. A number of experiments have shown that ND has the highest biocompatibility of all carbon-based nanomaterials including carbon blacks, multiwalled nanotubes, single-walled nanotubes and fullerenes. Additionally, the surface of ND can be readily derivatized with various functional groups for either covalent or noncovalent conjugation with biomolecules. Furthermore, some radiation-damaged NDs can emit strong and stable photoluminescence (red or green) from nitrogen-vacancy defect centers embedded in the crystal lattice. These properties together make ND a highly promising nanomaterial for both in vitro and in vivo applications.