High biocompatibility, variable size ranging from 5 nm, stable luminescence from its color centers, and simple carbon chemistry for biomolecule grafting make nanodiamond (ND) particles an attractive alternative to molecular dyes for drug-delivery. A novel method is presented that can be used for remote monitoring of chemical processes in biological environments based on color changes from photoluminescent (PL) nitrogen-vacancy (NV) centers in ND. The NV luminescence is driven chemically by alternating the surface chemical potential by interacting atoms and molecules with the diamond surface. Due to the small ND size, the changes of the surface chemical potential modify the electric field profile at the diamond surfaces (i.e., band bending) and intermingle with the electronic NV states. This leads to changes in NV-/NV degrees PL ratio and allows construction of optical chemo-biosensors operating in cells, with PL visible in classical confocal microscopes. This phenomenon is demonstrated on single crystal diamond containing engineered NV centers and on oxidized and hydrogenated ND in liquid physiological buffers for variously sized ND particles. Hydrogenation of NDs leads to quenching of luminescence related to negatively charged (NV-) centers and as a result produces color shifts from NV- (638 nm) to neutral NV degrees (575 nm) luminescence. How the reduction of diamond size increases the magnitude of the NV color shift phenomena is modeled.