X-ray magnetic circular dichroism (XMCD) experiments on diluted magnetic semiconductor nanocrystals were carried out to study the local electronic structure and magnetic properties of Mn(2+) embedded in the lattice of ZnSe nanoparticles. It is shown that Mn(2+) is exclusively present in the bulk of ZnSe nanoparticles. Neither Mn-Mn coupling nor traces of oxidation to higher Mn oxidation states was observed. This result, which is consistent with EPR spectroscopic data, provides clear proof of the location of Mn(2+) in semiconductor nanoparticles. Further, it is shown that the magnetic ions are highly polarised inside the nanocrystals, where they reach about 50 % of the theoretical value of a pure d(5) state under identical conditions.