For the development of a continuous diamond powder production process. a novel reactor concept, i.e., the acetylene partial combustion circulating fluidized bed (CFB) or, in other words, a spouted bed with a special draft tube is proposed and results from fundamental investigations are presented on the deposition kinetics, flame structure in terms of emission spectroscopy and the performance of a laboratory scale small CFB reactor. It was found that diamond particles can be deposited even on ordinary carbon and/or alumina substrates. In the acetylene partial combustion CFB reactor, diamond particles with clear 100 facets were obtained in a rather narrow range of the acetylene/oxygen ratio. In the case of the deposition on carbon particles, the optimum acetylene/oxygen ratio was found to be slightly low, indicating the gasification of substrate carbon itself. It has been clearly shown that diamond deposition on circulating suspension can be successfully done even if the once through contact time is small.