Investigation of films formed by vacuum deposition of Nb on single‐crystal MgO has demonstrated the importance of chemical interaction between the substrate and overgrowth in the epitaxial growth process. The interaction layer is composed of an oxygen‐stabilized face‐centered cubic modification of the normally bcc Nb, or the compund NbO, the thickness of which is controlled by the oxygen diffusion process in the layer. The previously observed nucleation‐coalescence process of thin film formation is replaced by ordered chemical reaction. Defect‐producing misorientations between nuclei, predominant in the nucleation‐coalescence case, are not present in the ordered chemical reaction process. Thin films may thus be produced having defect density no higher than that of the substrate crystal. The effect of interaction between the substrate and condensate, although large in the example presented, should not be overlooked in other considerations of the epitaxial process where chemical reaction cannot be ruled out.