Electron energy loss spectroscopy (EELS) has been used to investigate the electronic states of isolated, nanocrystalline carbon particles. Small carbon nanocrys-tals were prepared via sputter deposition onto SiO2 substrates, followed by annealing to 700C. The structure and size distribution of the particles have been characterized by Raman scattering, Auger electron spectroscopy and electron microscopy. EELS observations indicate that a semimetal to semiconductor transition occurs for particles smaller than lnm. In addition, hydrogen adsorption is found to significantly affect the electronic states of these particles, indicating that both finite size and dangling bond effects modify the properties of small carbon nanocrystallites.