The morphology and presence of impurities strongly influence mechanical, optical, electrical, and thermal properties of detonation nanodiamonds (DNDs). Here we report insights on the chemical composition and its effect on the optical properties of the DNDs obtained by rate-zonal density gradient ultracentrifugation. Herein, for the first time, a detailed valence band structure of as-prepared and oxidized DNDs is reported. Photoemission spectroscopy (PES) measurements demonstrate that the defects, originating from fullerene-like C bonding in the sp2 shells of the DNDs, are governing the literature-reported loss of the emission spectral features arising from the nitrogen-vacancy (NV) center excitations. X-ray photoelectron spectroscopy (XPS) measurements reveal that nitrogen is present in the DNDs in the form of N–O bonded species located at the surface region/sp2 shells, while in core of the DND it is in the form of N–C/N=C species.