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Nanostructured TiSiN coatings were deposited onto a tool steel substrate. The coated samples were then annealed under vacuum at temperatures ranging from 400° to 900°C. Both mechanical properties and residual stresses in the coatings were determined using nanoindentation methods, assisted by finite element analysis. Intrinsic residual stress was found to be dominant in the as-deposited coatings, but decreased with the increased annealing temperature. In contrast, thermal annealing has little impact on either the Young's modulus or hardness of the coatings at temperatures up to 800°C. Grazing incidence X-ray diffraction analysis indicated that stress relaxation occurred in nanocrystalline TiN grains during thermal annealing. Direct subsurface observation, enabled by focused ion beam microscopy, revealed that microstructural characteristics, responsible for both the Young's modulus and hardness of the coatings remained unaffected during thermal annealing. The degradation of mechanical properties for the coatings annealed at 900°C resulted primarily from the formation of a thin, soft titanium oxide layer at the outer surface. [ABSTRACT FROM AUTHOR]