The annealing of Ni layers, 12 nm thick, deposited on Si(100) and relaxed Si0.75Ge0.25 substrates has been studied using an ultrahigh vacuum in situ transmission electron microscope. In this paper we report direct observations of the formation and agglomeration of nickel monosilicide films, followed by the nucleation of NiSi2 at higher temperatures in both cases. This transformation has not been observed previously in the case of Si1-xGex substrates, the reaction being suppressed from 650 to similar to 950 degrees C in the presence of Ge. Our data provides strong evidence of the importance of surface relaxation in the relief of transformation-induced strain. (C) 2004 The Electrochemical Society.