Colloidal dispersion is essential for most nanodiamond applications, but its influence on nanodiamond electronic properties remains unknown. Here we have probed the electronic structure of oxidized detonation nanodiamonds dispersed in water by using soft X-ray absorption and emission spectroscopies at the carbon and oxygen K edges. Upon dispersion in water, the π* transitions from sp2-hybridized carbon disappear, and holes in the valence band are observed.