The protection of sensitive structures (e.g., nerves) from iatrogenic damage is of major importance when performing laser surgical procedures. Especially in the head and neck area both function and esthetics can be affected to a great extent. Despite its many benefits, the surgical utilization of a laser is therefore still limited to superficial tissue ablation. A remote feedback system which guides the laser in a tissue-specific way would provide a remedy. In this context, it has been shown that nerval structures can be specifically recognized by their optical diffuse reflectance spectra both before and after laser ablation. However, for a translation of these findings to the actual laser ablation process, a nerve protection within the laser pulse is of utmost significance. Thus, it was the aim of the study to evaluate, if the process of Er:YAG laser surgery—which comes with spray water cooling, angulation of the probe (60°) and optical process emissions—interferes with optical tissue differentiation. For the first time, no stable conditions but the ongoing process of laser tissue ablation was examined. Therefore, six different tissue types (nerve, skin, muscle, fat, cortical and cancellous bone) were acquired from 15 pig heads. Measurements were performed during Er:YAG laser ablation. Diffuse reflectance spectra (4500, wavelength range: 350–650 nm) where acquired. Principal component analysis (PCA) and quadratic discriminant analysis (QDA) were calculated for classification purposes. The clinical highly relevant differentiation between nerve and bone was performed correctly with an AUC of 95.3% (cortial bone) respectively 92.4% (cancellous bone). The identification of nerve tissue against the biological very similar fat tissue yielded good results with an AUC value of 83.4% (sensitivity: 72.3%, specificity: of 82.3%). This clearly demonstrates that nerve identification by diffuse reflectance spectroscopy works reliably in the ongoing process of laser ablation in spite of the laser beam, spray water cooling and the tissue alterations entailed by tissue laser ablation. This is an essential step towards a clinical utilization.