The growth of coalesced, highly oriented diamond films has been achieved on nickel substrates using a multistep process that consisted of (i) seeding the Ni surface with 0.5 μm diamond powder, (ii) annealing at 1100 °C in a hydrogen atmosphere, and (iii) growth at 900 °C in a mixture of hydrogen and 0.5% methane. Auger depth profile analysis of a sample quenched after the annealing stage showed the presence of significant amounts of carbon (6 at. %) close to the substrate surface and about 3 at.% deeper in the substrate. The loss of carbon into the substrate resulted in relatively low nucleation density. The addition of methane into the gas phase during the annealing stage proved very effective in compensating for the diffusion. An addition of 0.5% methane in the gas phase produced optimum results, as the nucleation density, orientation of diamond particles, and uniformity were substantially improved. Substrates nucleated under these conditions were grown out into coalesced, 30 μm thick films. Both (100) and (111) oriented films showed a high degree of orientation and Raman spectra obtained from these orientations showed intense and narrow diamond signature peaks with FWHM's of 5 and 8 cm-1, respectively.