Recent studies on carbon nanomaterials for biological applications revealed that carbon nanodiamonds are much more biocompatible than most other carbon nanomaterials, including carbon blacks, fullerenes and carbon nanotubes. The noncytotoxic nature of nanodiamonds, together with their unique strong and stable photoluminescence, tiny size, large specific surface area and ease with which they can be functionalized with biomolecules, makes nanodiamonds attractive for various biomedical applications both in vitro and in vivo. In this article, we present some of the important issues concerning the synthesis and surface functionalization of diamond nanoparticles for nanomedicine as well as an overview of the recent progress in this exciting field by focusing on the potential use of nanodiamonds and their derivatives for single particle imaging in cells, drug delivery, protein separation and biosensing.