Co-deposited, immiscible alloy systems form hierarchical microstructures under specific deposition conditions that accentuate the difference in constituent element mobility. The mechanism leading to the formation of these unique hierarchical morphologies during the deposition process is difficult to identify, since the characterization of these microstructures is typically carried out post-deposition. We employ phase-field modeling to study the evolution of microstructures during deposition combined with microscopy characterization of experimentally deposited thin films to reveal the origin of the formation mechanism of hierarchical morphologies in co-deposited, immiscible alloy thin films. Our results trace this back to the significant influence of a local compositional driving force that occurs near the surface of the growing thin film. We show that local variations in the concentration of the vapor phase near the surface, resulting in nuclei (i.e., a cluster of atoms) on the film’s surface with an inhomogeneous composition, can trigger the simultaneous evolution of multiple concentration modulations across multiple length scales, leading to hierarchical morphologies. We show that locally, the concentration must be above a certain threshold value in order to generate distinct hierarchical morphologies in a single domain.