The effect of annealing of Co/ZnO(0001) was studied by scanning tunneling microscopy, low energy electron diffraction, and Auger electron spectroscopy. At room temperature, Co forms islands on ZnO. Annealing up to 940 K leads to coalescence of the islands. At 970 K, Co diffuses into ZnO where it partially replaces Zn. A model of the Auger intensities, based on exponential attenuation with thickness and including correction for matrix effects, confirms this interpretation and suggests that the fraction of Zn replaced by Co is near 50% or higher. (C) 2007 American Vacuum Society.