Nanodiamond composite (NDC) coatings fabricated by coaxial arc plasma deposition (CAPD) exhibit exceptional structural and mechanical properties, making them promising candidates for advanced cutting tool applications. However, the influence of certain key factors, such as the target-substrate distance (TSD), on the growth and characteristics of NDC films remains unclear. TSD affects the substrate ion current and ion bombardment energy, intimately linked to the structure and tribo-mechanical properties of the protective coatings. Therefore, NDC films were fabricated at diverse TSD values ranging from 5 to 50 mm, and their adhesion, hardness, and modulus of elasticity were investigated. The results revealed that growth and adhesion were significantly affected by TSD, whereas hardness and elastic modulus remained constant (from 10 to 50 mm TSD). The film's thickness declined from 21.88 to 1.8 μm with increasing TSD, and the film quality improved due to macroparticle elimination. Notably, the sample prepared at a distance of 10 mm exhibited the best adhesion resistance, together with a high thickness of 11.45 μm with a hardness of around 50 GPa. The target-substrate distance was revealed to have a crucial potential for determining the structural and mechanical characteristics of NDC films deposited by CAPD.