GRAPHITIZATION of diamond at ambient pressure,vas first observed in the 1920s(1,2), but the mechanisms responsible for this transformation and, in particular, those underlying the nucleation and growth of graphite in diamond, remain controversial(3-5). In addition to their fundamental interest, these processes have technological relevance-for example, for the growth by chemical vapour deposition(6) of diamond-like films, which sometimes include graphitic islands(7), Here we report the results of first-principles molecular dynamics simulations of a surface-induced diamond-to-graphite transition, which provide a microscopic model for the early stages of the graphitization process, We find that a well defined diamond/graphite interface forms during the transition; the electronic properties of the atoms at this interface suggest that they are highly chemically active sites. In addition to its relevance to graphite inclusion in diamond films, our model should yield insight into the process of selective etching in vapour-deposited carbon films, and possibly also into diamond nucleation.