Ge nanoparticles embedded in thin films have attracted a lot of attention due to their promising optical and electronic properties that can be tuned by varying the particle size and choice of matrix material. In this study, Ge nanoparticle formation was investigated for Al-Ge-N based thin films by simultaneous measurements of HAXPES and grazing incidence XRD during in situ annealing in vacuum conditions. As-deposited Al-Ge-N thin films, synthesized by reactive dc magnetron sputtering, consisted of a nanocrystalline (Al1-xGex)N-y solid solution and an amorphous tissue phase of Ge3Ny. Upon annealing to 750 degrees C, elemental Ge was formed shown by both HAXPES and XRD measurements, and N-2 gas was released as measured by a mass spectrometer. Postannealed ex situ analysis by SEM and TEM showed that the elemental Ge phase formed spherical nanoparticles on the surface of the film, with an average size of 210 nm. As the annealing temperature increased further to 850 degrees C, the Ge particles on the film surface evaporated, while the phase segregation of Ge still could be observed within the film. Thus, these results show the possibility for a controlled synthesis of Ge nanoparticles through annealing of Al-Ge-N thin films to produce materials suitable for use in electronic or optoelectronic devices.