The spin dynamics in Ni is studied by an exact diagonalization method on the ultrafast time scale. It is shown that the femtosecond relaxation of the magneto-optical response results from exchange interaction and spin-orbit coupling. Each of the two mechanisms affects the relaxation process differently. We find that the intrinsic spin dynamics occurs during about 10 fs while extrinsic effects such as laser-pulse duration and spectral width can slow down the observed dynamics considerably. Thus, our theory indicates that there is still room to accelerate the spin dynamics in experiments.