In-depth research on structural transformations induced by electron beam will be helpful for the design and manufacture of nanostructures. The nucleation and growth mechanism of CdO nanocrystals on CdS matrix was studied through in situ transmission electron microscopy observation. The results of energy dispersive spectrum reveal the electron beam induced surface oxidation of CdS. CdO nanocrystals nucleate through a non-classical two-step nucleation path on CdS surface. Amorphous cluster forms first as the intermediate phase in the two-step nucleation of CdO nanocrystals. Then unstable crystal nucleus is formed in the amorphous phase, accompanied by reversible disorder–order transitions. After absorbing the amorphous phase and rapidly growing, the CdO nucleus grows through the classic layer-by-layer growth mechanism. Furthermore, six nonequivalent heterojunction interface orientation relationships between CdO nanocrystals and CdS matrix were deeply analyzed. This work demonstrates potential application prospects for atomic manufacturing and interface control of semiconductor heterojunction.