The influence of the high-temperature annealing ambient, i.e., N-2 and Ar on size controlled Si nanocrystals (NCs) ranging from similar to 2 to similar to 6 nm embedded in SiO2 has been investigated in detail. Generally, N-2 annealing is proven to be beneficial as the dangling bond density (P-b defects at the NC/SiO2 interface) is about half, accompanied by a doubled photoluminescence (PL) intensity. The PL blueshift of N-2 annealed samples compared to Ar-annealed samples (N-blueshift) was found to be pronounced only for small NCs whereas it appears to be insignificant for larger NCs. The origin of this N-blueshift was previously attributed to a growth suppression of the NCs by the presence of N during the annealing process. However, no evidence for this assumption is found by time-resolved PL, as the luminescence decay times are similar despite considerable N-blueshift. The exact location of the N incorporated during annealing was investigated by time-of-flight-SIMS and electron-spin resonance. Besides the distinct N enrichment in the NC layer, the K-0 center (Si-center dot N-3) was detected indicating the formation of an interfacial N layer at the NC/SiO2 interface. Elastic recoil detection analysis enabled the quantification of the incorporated N as well as the excess Si. Combined with transmission electron microscopy analysis (determination of NC size) the calculation of the NC density per superlattice layer and the thickness of the interfacial N layer were achieved. It turns out that similar to 5 x 10(14) N atoms cm(-2) exist at the NC surface, which is well in accordance to the optimum value of the bulk Si/SiO2 interface. These results strongly support our recently suggested explanation for the N-blueshift that is based on an increased NC band gap by the influence of interfacial N on the polarity of the surface terminating groups.