The addition of oxygen to a diluted methane/hydrogen gas mixture (2% CH4 in H-2) activated by a microwave discharge during diamond film deposition has been studied. We have observed that oxygen addition at very low concentrations (< 2%) to the methane/hydrogen gas mixture makes the nucleation of diamond crystals more difficult, by causing a sharp decrease in the deposition rate of the diamond film. For increasing oxygen concentrations, in the [O-2] = 0.25-1% range, the diamond and graphite deposition rates remain nearly constant, showing a slight decrease in the graphite deposition rate for [O-2] = 1%. By contrast, for higher oxygen concentrations (1% < [O-2] < 2.5%) thinner films of a high quality are deposited (diamond content > 84%). These facts have been explained by an abrupt change in the chemical processes when the oxygen is fed to the CH4 + H-2 mixture, even in a small concentration We assume that the role of the atomic oxygen is two-fold : (i) formation of OH radicals, which etch the diamond and graphite phases at high rates. and (ii) direct etching of the initial carbon layer formed during the nucleation stage, producing CO molecules. However, for [O-2] greater than or equal to 2.5% the carbon etching rate (for all the phases) is so high that no continuous film can be deposited, In this paper we present the relative variation of the formation, in the 0-2.5% oxygen range. for both the diamond and non-diamond phases, as determined by Raman spectroscopy and scanning electron microscopy. The results have been related to the changes in the plasma composition (mainly the OH, O and CO species), as detected by optical emission spectroscopy and mass spectrometry.