Structure and mechanical properties of nanoscale multilayers of ZrN/Zr0.63Al0.37N grown by reactive magnetron sputtering on MgO (0 0 1) substrates at a temperature of 700 degrees C are investigated as a function of the Zr0.63Al0.37N layer thickness. The Zr0.63Al0.37N undergoes in situ chemical segregation into ZrN-rich and AlN-rich domains. The AlN-rich domains undergo transition from cubic to wurtzite crystal structure as a function of Zr0.63Al0.37N layer thickness. Such structural transformation allows systematic variation of hardness as well as fracture resistance of the films. A maximum fracture resistance is achieved for 2 nm thick Zr0.63Al0.37N layers where the AlN-rich domains are epitaxially stabilized in the metastable cubic phase. The metastable cubic-AlN phase undergoes stress-induced transformation to wurtzite-AlN when subjected to indentation, which results in the enhanced fracture resistance. A maximum hardness of 34 GPa is obtained for 10 nm thick Zr0.63Al0.37N layers where the wurtzite-AlN and cubic-ZrN rich domains form semi-coherent interfaces. (C) 2015 Acta Materialia Inc. Published by Elsevier Ltd. All rights reserved.