Germanium (Ge) nanoclusters are grown by a molecular-beam epitaxy technique on the chemically oxidized Si(1 0 0) surface at 700 °C. X-ray diffraction and photocurrent spectroscopy demonstrate that the nanoclusters have the local structure of body-centred-tetragonal Ge, exhibiting an optical adsorption edge at 0.48 eV at 50 K. Deposition of silicon on the surface with Ge nanoclusters leads to surface reconstruction and formation of polycrystalline diamond-like Si coverage, while nanoclusters' core becomes tetragonal SiGe alloy. The intrinsic absorption edge is shifted to 0.73 eV due to Si–Ge intermixing. Possible mechanisms for nanoclusters growth are discussed.