We present optical (6500-9200Å) spectroscopy of eight cool dwarfs detected in a 231 square degree "Mini-survey" of the Deep NEar Infrared Survey (DENIS) data. We are able to confirm that the spectral types derived from the Mini-survey infrared spectroscopy are meaningful. We provide a spectral sequence which extends beyond the M-dwarf range and into the proposed "L" class of dwarfs. The dominant spectral features in the optical for these L-type dwarfs are resonance lines of Cs I and molecular band heads of CrH and FeH. The other dominant feature in these L-type spectra is a broad 600 A absorption dip centered on 7700 A, which we identify with extremely strong (equivalent width ∼ several hundred A) absorption associated with the 7664,7698 Å resonance doublet of KI. We find that model atmospheres which include the effects of molecular condensation without dust opacity (to simulate rapid gravitational settling of dust grains) produce significantly better agreement with observed optical spectra for L-type dwarfs, than models including dust opacity. This suggests gravitational settling of dust grains plays an important role in L-dwarf photospheres. The extreme strength of the KI resonance doublet, and disappearance of TiO and VO, and the consequent dominance of CrH and FeH in L-dwarf spectra offer considerable prospects as sensitive effective temperature diagnostics, even at low spectral resolution. © 2004 Elsevier Science B.V., Amsterdam. All rights reserved.