The ability to increase the thermal stability of protective coatings under work load gives rise to scientific and industrial interest in age hardening of complex nitride coating systems such as ceramic-like Ti1-xAlxN. However, the decomposition pathway of these systems from single-phase cubic to the thermodynamically stable binary nitrides (cubic TiN and wurtzite AlN), which are essential for age hardening, are not yet fully understood. In particular, the role of decomposition kinetics still requires more detailed investigation. In the present work, the combined effect of annealing time and temperature upon the nano-structural development of Ti0.46Al0.54N thin films is studied, with a thermal exposure of either 1 min or 120 min in 100 °C steps from 500 °C to 1400 °C. The impact of chemical changes at the atomic scale on the development of micro-strain and mechanical properties is studied by post-annealing investigations using X-ray diffraction, nanoindentation, 3D-atom probe tomography and high-resolution transmission electron microscopy. The results clearly demonstrate that the spinodal decomposition process, triggering the increase of micro-strain and hardness, although taking place throughout the entire volume, is enhanced at high diffusivity paths such as grain or column boundaries and followed within the grains. Ab initio calculations further show that the early stages of wurtzite AlN precipitation are connected with increased strain formation, which is in excellent agreement with experimental observations.