Al/AlN multilayers with bilayer thicknesses ranging from 10 to 50 nm were fabricated using a filtered cathodic arc deposition system. The effects on the microstructure of using two different deposition rates and applying an 8 kV pulsed voltage (plasma immersion ion implantation or PIII) to the substrate were explored. The microstructure was found to undergo a transition in which the Al transformed from layers to an aggregated phase under some conditions. This behavior is explained by a model in which the aggregation process is limited by diffusion. High deposition rates and the application of PIII were both found to encourage the transition by increasing diffusion. The model defines a phase diagram which predicts whether a multilayer or an aggregated structure will occur. A maximum in intrinsic stress was found to occur when the average feature size was 15 nm for both layers and aggregates.