Sputter etching normally removes material with an overall composition equal to the target composition. At room temperature, this steady-state removal process is usually quickly established by the formation of an altered surface layer which compensates for preferential sputtering, together with an altered subsurface layer which reflects the existence of bombardment-induced Gibbsian segregation (GS). At elevated temperature, ordinary GS, diffusion and the presence of compound phases may strongly affect the development of the steady-state condition. In this paper, we describe two cases in which diffusion and GS become significant processes during sputter etching of a compound material AxB1−x on an underlying substrate of B atoms. In the first case, diffusion is dominated by the substrate species. This case is demonstrated by the sputtering of TiSi2 on (100) Si by 300 eV Ar+. At room temperature, normal sputtering of the TiSi2 layer occurs. At elevated temperature (500–700°C), however, Si diffuses from the substrate to the surface, where it undergoes GS. This allows the development of a steady-state highly selective sputtering of Si atoms, accompanied by movement of the TiSi2 layer into the substrate. In the second case, diffusion is dominated by the non-substrate species. This case is demonstrated by CoSi2, for which the development of steady-state etching occurs in two distinct stages which are strongly temperature-dependent. In this material, Co is the dominant diffusing species, and it is unclear whether or not Si GS occurs. What is clear, however, is that Ar+ bombardment at 500–600°C leads to partial decomposition of the CoSi2 layer and diffusion of Co towards the substrate Si, where new CoSi2 is formed. The combination of sputter etching and elevated temperature is shown to be a controllable environment for compound phase formation at a buried interface.