Thermal treatment of supersaturated Ti1−xAlxN films (x≈0.67) with a dominant ternary cubic-phase were performed in the 700–1000°C range. Grazing incidence X-ray diffraction (GIXRD) shows that, for annealing temperatures up to 800°C, the film structure undergoes the formation of coherent cubic AlN (c-AlN) and TiN (c-TiN) nanocrystallites via spinodal decomposition and, at higher temperatures (⩾900°C), GIXRD shows that the c-AlN phase transforms into the thermodynamically more stable hexagonal AlN (h-AlN). X-ray absorption near-edge structure (XANES) at the Ti K-edge is consistent with spinodal decomposition taking place at 800°C, while Al K-edge and N K-edge XANES and X-ray emission data show the nucleation of the h-AlN phase at temperatures >800°C, in agreement with the two-step decomposition process for rock-salt structured TiAlN, which was also supported by X-ray diffraction patterns and first-principle calculations. Further, the resonant inelastic X-ray scattering technique near the N K-edge revealed that N2 is formed as a consequence of the phase transformation process.