The evolution of the morphology of Ni-oxide nanostructures on Ag(100) as a function of temperature has been followed experimentally by scanning tunneling microscopy (STM) and theoretically by density-functional theory (DFT) calculations. After reactive deposition at room temperature and annealing at 450 K, the NiO(2 × 1) phase embedded into the Ag substrate is formed due to kinetic stabilization during growth. The (2 × 1) structure is replaced by the thermodynamically more stable NiO (100)(1 × 1) phase, also embedded into the Ag substrate, for annealing at T > 500 K. As shown by DFT modeling and in agreement with experimental STM contrast, the formation of second-layer NiO patches below the NiO(1 × 1) monolayer is an effective means of strain relief in the NiO(1 × 1) monolayer islands. For T > 600 K, the increased possibilities of mass transport lead to an intriguing surface morphology called "labyrinth" phase, with narrow high-aspect ratio embedded NiO(1 × 1)-type islands. The latter are stabilized by the interaction of the NiO borders with the Ag(100) substrate via double-layer boundary lines, which according to the DFT calculations provide the essential elements of this thermodynamic ground state.