Epitaxial nanocrystalline Ag films were grown on initially native-oxide-covered Si(001) substrates using radio-frequency magnetron sputtering. Mechanisms of grain growth and morphology evolution were investigated. An epitaxially oriented Ag layer (∼5 nm thick) formed on the oxide-desorbed Si surface during the initial growth phase. After a period of growth instability, characterized as kinetic roughening, grain growth stagnation, and increase of step-edge density, a layer of nanocrystalline Ag grains with a uniform size distribution appeared on the quasi-two-dimensional layer. This hierarchical process of film formation is attributed to the dynamic interplay between incoming energetic Ag particles and native oxide. The cyclic interaction (desorption and migration) of the oxide with the growing Ag film is found to play a crucial role in the characteristic evolution of grain growth and morphology change involving an interval of grain growth stagnation.