In order to understand Ge island nucleation and evolution, we have studied strain relaxation and clustering of Ge grown on Si(111) by molecular beam epitaxy (MBE) with in situ reflection high energy electron diffraction (RHEED), atomic force microscopy (AFM), and Rutherford backscattering spectrometry (RBS). Our goal is to tailor the size and density of the nanocrystals by controlling thermodynamics and kinetics. At low temperature (∼ 450°C), we observe a sharp 2D–3D growth mode transition after 2.5ML ±0.1ML (we define a thickness of 1ML to be one-third the length of the body diagonal of the Ge conventional unit cell), when transmission diffraction features appear in RHEED and the surface lattice constant begins to relax. The mechanisms of island growth and strain relaxation change with growth temperature. At ∼ 700°C, transmission diffraction spots never appear in RHEED for Ge/Si(111) and strain relaxation occurs gradually. After 37ML of growth, the apparent in-plane lattice parameter increases only 1.5% over that of the Si substrate. This behavior is explained by the different manner in which islands initially nucleate and grow in the two temperature regimes. At low temperature, small islands nucleate and grow on a relatively rough wetting layer (which itself provides preferential sites for dislocation introduction). The areal density of the small islands is relatively high. At high temperature, a small number of islands grow very large from the outset. A general model indicates how, at low temperature. The relative difficulty of overcoming the barrier to dislocation formation actually results in an apparent larger degree of strain relief than at high temperature.