The nucleation mechanism of eutectic grains in hypoeutectic Al-Si foundry alloys has been investigated by examining deep etched specimens in high-resolution field emission gun scanning electron microscope (FEG-SEM) and by using in-situ Focused Ion Beam (FIB) milling and microscopy. Both unmodified and Sr-modified alloys were studied to characterize the nucleation mechanism of eutectic silicon flakes and fibers. It is proposed that following nucleation of eutectic Al on the primary α-Al dendrites, fine Si particles form at the solidification front upon which the eutectic Si flakes and fibers could develop. The formation of small Si particles is attributed to Si enrichment of the remaining melt due to the formation of eutectic Al (aluminum spikes) at the eutectic temperature. A hypothesis is then proposed to explain the mechanism of eutectic grains formation with main emphasis on the eutectic Si phase.