Here we report a novel degradation mechanism of nanomultilayers, as observed during vacuum annealing of Cu/Nb nanomultilayer, in which the formation of nanocomposite structure is accompanied by hillock growth on the surface of the nanomultilayer. The structural transformation of the Cu/Nb nanomultilayer occurs mainly through progressive hillock growth, rather than through the conventionally known degradation mechanisms of grain boundary grooving, pinch-off, and subsequent spheroidization, which do not necessitate hillock growth. Cu hillock growth was first observed after annealing the nanomultilayer at 600 °C. Cross-sectional microstructural analysis revealed that both a nanocomposite and a nanolayered structure existed simultaneously. While nanocomposite structure was formed beneath a Cu hillock, the nanolayered structure was preserved away from the Cu hillock. The estimated value of activation energy for the degradation of the Cu/Nb nanomultilayer indicates that the process depends on both i) the lattice diffusion of Cu, and ii) Nb diffusion along surface and grain/phase boundary.