The spectral energy distribution of quasars shows a sharp steepening of the continuum shortward of ≃ 1100 Å. The steepening could be a result of dust absorption. We present a dust extinction model which considers crystalline carbon grains and compare it with SMC-like dust extinction consisting of a mixture of silicate grains with graphite or amorphous carbon grains. We show that the sharp break seen in individual quasar spectra of intermediate redshift ∼1-2 can be reproduced by dust absorption provided the extinction curve consists of nanodiamonds, composed of terrestial cubic diamonds or of diamonds similar to the presolar nanodiamonds found in primitive meteorites.