We report on the oriented nucleation of CdS nanocrystals on well-defined polydiacetylene Langmuir film templates. Nucleation on the red phase of polydiacetylene resulted in ordered linear arrays of CdS nanocrystals that are aligned with respect to the template. High resolution transmission electron microscopy showed crystalline particles of ~5 to 8 nm size. Selected area electron diffraction micrographs showed spot patterns which are attributed to the well-defined orientations of both polymorphs: the cubic zinc blende and the hexagonal wurtzite polymorphs of CdS. We present a unique growth mechanism where oriented nucleation of CdS on the polydiacetylene template initially takes place in the zinc blende phase. Beyond a certain size threshold, growth proceeds in the more stable wurtzite phase. This transformation keeps the stacking direction of the close packed planes, while altering only their stacking sequence. Notably, size-confinement effects were observed in electron diffraction patterns from the wurtzite phase. These effects originated from off-axis planes that do not fulfill the Bragg conditions, yet their elongated Bragg rods intersect with the Ewald sphere, giving rise to unexpected reflections.