The interest in nanodiamond applications in biology and medicine is on the rise over recent years. This is due to the unique combination of properties that nanodiamond provides. Small size (~5 nm), low cost, scalable production, negligible toxicity, chemical inertness of diamond core and rich chemistry of nanodiamond surface, as well as bright and robust fluorescence resistant to photobleaching are the distinct parameters that render nanodiamond superior to any other nanomaterial when it comes to biomedical applications. The most exciting recent results have been related to the use of nanodiamonds for drug delivery and diagnostics—two components of a quickly growing area of biomedical research dubbed theranostics. However, nanodiamond offers much more in addition: it can be used to produce biodegradable bone surgery devices, tissue engineering scaffolds, kill drug resistant microbes, help us to fight viruses, and deliver genetic material into cell nucleus. All these exciting opportunities require an in-depth understanding of nanodiamond. This review covers the recent progress as well as general trends in biomedical applications of nanodiamond, and underlines the importance of purification, characterization, and rational modification of this nanomaterial when designing nanodiamond based theranostic platforms.