Demarçay's interests moved from organic chemistry to organometallics and then to inorganic chemistry. He applied for a professorial position at the Academie des sciences in 1878, but was not accepted.
He became particularly interested in studying nitrogen sulfides, publishing three papers in 1880–1881. These compounds appear stable at room temperature, but are sensitive to heat, friction, and shock, and are likely to explode when heated. During an experiment with nitrogen and sulfur, a cast-iron vessel exploded and destroyed the sight in one of his eyes.
He established his own private laboratory at 2 Boulevard Berthier, Paris. In 1881–1882, he developed a vacuum system to control temperature during experiments. 1.5 metres high, it consisted of 3 concentric vessels and a compressor driven by a six horsepower gas engine. Temperature in the center vessel could be reduced to −85 °C. Demarçay used this to study the volatility of substances such as zinc, cadmium, and gold at low temperatures.
Demarçay became a specialist in reading the line patterns of spectroscopy. He developed new techniques for the identification of spectra from rare earth metals. He developed an instrument for obtaining spectra, using an induction coil with pure platinum electrodes to produce a high spark temperature that eliminated impurities that could cause foreign spectral lines. By eliminating sources of error, he made it possible to separate out purer samples of various rare earths than had previously been available.
In 1896, he suspected that samples of the recently discovered element samarium were contaminated with another unknown element, predicting that it would be located between samarium and gadolinium.  To obtain pure enough samples, he developed a new separation technique involving crystallization of double magnesium nitrate salts. By 1901, he had isolated samples of sufficient purity to confirm the isolation of europium.
In 1898, using his skills of spectroscopy, he help Marie and Pierre Curie  confirm  the isolation of a new element, radium. After extracting polonium from pitchblende they observed that the remaining sample was still radioactive. They consulted Demarçay, who reported a  line in the spectrograph indicative of a new element.