We investigated the surface diffusion and island nucleation of Ge on Si(100) in presence of a submonolayer coverage of carbon as surfactant by using scanning Auger microscopy and atomic force microscopy. Ge stripes have been deposited and lithographically etched on a Si substrate and used as sources for the surface diffusion of Ge promoted by annealing at 600, 650, and 700 °C. The diffusion coefficient has been determined by fitting the postannealing coverage profiles measured by Auger microscopy with a one-dimensional continuous model. The carbon coverage has been spatially modulated on a single sample, allowing the measurement of the diffusion coefficient as a function of the C thickness at 600 °C. We show that the reduction in the diffusion coefficient while increasing the surfactant coverage is described by a linear dependence of the diffusion activation energy on the C coverage. This dependence is discussed in terms of the chemical interactions among Si, C, and Ge, of the surface roughness and the local strain field induced by the C surfactant. Spontaneous nucleation of SiGe islands coexists with the continuous surface diffusion of Ge. The transition of the island nucleation as a function of the carbon coverage is observed to be continuous from the Stranski-Krastanov mode to the Volmer-Weber regime. We propose a consistent scenario correlating diffusion and nucleation parameters within a diffusion limited growth regime and show the existence of a threshold for C coverage below which no effect is observed.