Quantum confinement effect in the valence band of Ge nanodots, fabricated onto an ultrathin SiO₂ film on Si(111) substrate, was clearly measured by means of photoemission spectroscopy. Dot-size dependent shifts of the highest occupied state were well described by quantized energy levels of confined holes by the spherical parabolic potential. Two-types of Ge nanodots with different interface conditions, named as ‘epitaxial’ and ‘non-epitaxial’, can be fabricated depending on the growth temperature. The actual confining potentials for the quantum states in the two-types of Ge nanodots were evaluated, which clearly indicates drastic reduction of the confining potential barrier height for the epitaxial dots owing to voids formed in the interface SiO₂ layer just below the Ge nanodots.