Although vanadium oxide (VOx) phases are thermodynamically similar, Y‐stabilized ZrO2 (YSZ) substrates show selective growth as single‐crystalline films. However, in this study, we find that the films degrade with the formation of nanoislands when evaporating VOx onto YSZ at a substrate temperature >500 °C. The nanoislands are epitaxial, i.e., Y‐doped VO2(R) at an oxygen partial pressure PO2 < 30 mTorr, and YVO4 at PO2 > 50 mTorr. Energy‐dispersive X‐ray spectroscopy shows that the rapid diffusion of vanadium and yttrium plays a critical role in film degradation. The degradation mechanism revealed herein guides the fabrication of VOx films for energy and electronic device applications.