Abstract— In a recent advancement to reduce friction and wear between rotating contact surfaces and improve machine reliability, the use of a nanomaterial based lubricant instead of the conventional mineral based-one has been promoted. Currently there is a very limited body of research on this topic due to its recent emerging. An in depth studies and research are in need to investigate the type of improvements gained by using nanomaterial additives, especially on the levels of vibrations and the changes to the diagnosis features within the vibration signal. This paper investigates the effect of the use of a nanomaterial-based lubricant on the levels of vibration from defective rolling element bearings (outer race fault). A bearing test rig with hydraulic loading has been designed to enable the collection of vibration data. A 1 mm outer race defect was seeded in a self-aligning bearing using electrical discharge machining. The level and nature of the vibration signals with 0.1%, 0.2%, 0.3% and 0.5% of copper dioxide (Cu2O) particles of two different sizes (30 nm and 70 nm) were compared. Results show that the energy level of the impact (root mean squared value) drops as a result of introducing the 30 and 70 nm particles with the highest drop reported at a concentration of 0.5% for the 70 nm. The impulsiveness of the signals (Kurtosis levels) are lower for the 70nm compared to the 30 nm and the lowest was recorded at a concentration of 0.2%. The noise associated with adding the nanomaterial is observed to increase and to affect frequency bands above 5 kHz.