V-alloyed AlCrN hard coatings were deposited by reactive arc evaporation in an industrial-sized deposition system and subsequently annealed in ambient air at temperatures ranging from 550 to 700 °C in order to study the formation mechanisms of the desired lubricious oxides. The oxidized samples were investigated by means of secondary ion mass spectrometry depth profiling, x-ray diffraction, Raman spectroscopy, and analytical transmission electron microscopy. Vanadium diffusion in the oxidized part of the coating leads to the formation of a V-rich top layer containing AlV O4 and the desired lubricious oxide V2 O5 followed by a V-depleted inner oxide layer consisting of a mixed or nanocrystalline (Al,Cr,V)2 O3 on top of the intact AlCrVN coating.