A basic and important way to prepare diamond is to make graphite experience the phase transformation under the high-pressure high-temperature (HPHT) condition. However, this method needs stringent equipment and high investment cost. Recently, we proposed a method to prepare the diamond by phase transformation of graphite at atmospheric pressure with monodispersed Ta atoms. It is found that a phase transformation happens to H atoms under atmospheric pressure, but the role of O atoms has not been investigated. Here, we use tantalum wires as Ta source and heat the filaments to prepare vertical graphene containing Ta atoms in hot filament chemical vapor deposition (HFCVD) system. And then the vertical graphene layers are annealed in oxygen-containing environment, and nanodiamonds are obtained by phase transformation from the vertical graphene under atmospheric pressure. The results show that the sample morphologies are the same as the untreated vertical graphene’s, when the annealed ambient air pressure is at 10 Pa and 50 Pa with oxygen atom content of 1.96% and 2.04%, respectively; TEM tests reveal TaC and graphite but no diamond in these samples . Nanodiamond grains with the size range of 2–4 nm are observed in the amorphous carbon region of samples annealed at 100 Pa and 500 Pa air pressure with oxygen atom content increasing to 2.77% and 3.11%, respectively, indicating that oxidation facilitates the phase change from Ta-containing vertical graphene to diamond at atmospheric pressure. When the air pressure of the annealing environment rises to 1000 Pa with the oxygen atom content of 3.54%, the sample is extensively oxidized and the graphite structure is severely damaged,which means that a large number of oxygen atoms tend to disrupt the graphite structure rather than promote the phase change into diamond. These results supply a way to prepare nanodiamond and show the effect of O atoms in the graphite phase transition at atmospheric pressure.