The interaction between Fe-coatings and ultrananocrystalline diamond (UNCD) films during annealing was investigated in detail using transmission electron microscopy. The thin Fe-coating first formed nanosized Fe-clusters and then catalytically dissociated the diamond, re-precipitating carbon to form nanosized graphite clusters. These clusters formed conducting networks that facilitated electron transport and greatly improved the electron field emission (EFE) properties of the UNCD films. The extent of enhancement varied markedly with annealing temperature and atmosphere. For H2-annealed films, EFE behavior was optimized by annealing at 900 °C. EFE was turned on at (E0)H2 = 1.2 V/μm, attaining EFE current density of (Je)H2 = 772.0 μA/cm2 at an applied field of 8.8 V/mm. These characteristics were superior to those of UNCD films NH3-annealed at 850 °C. The inferior EFE properties for the NH3-annealed samples were attributed to reaction of NH3 with the hydrocarbon phase that encapsulated the nanosized diamond grains, hindering Fe–diamond interaction.