The synthesis of Au-MoS2 nanocomposite thin films and the evolution of their structures during film growth, in situ transmission electron microscopy (TEM) heating, and sliding contact were investigated. TEM revealed that the films deposited at ambient (room) temperature (RT) consisted of 2-4 nm size Au particles in a matrix of MoS2. With increasing growth temperatures, the nanocomposite film exhibited structural changes: the Au nanoparticles coarsened by diffusion-driven Ostwald ripening to 5-10 nm size and the MoS2 basal planes encapsulated the Au nanoparticles thereby forming a solid Au-core MoS2 structure. However, when the RT deposited film was heated inside the TEM, the highly ordered MoS2 basal planes did not encapsulate the Au, suggesting that MoS2 surface diffusivity during film growth is different than MoS2 bulk diffusion. Increases in MoS2 crystallinity and coarsening of Au nanoparticles (up to 10 nm at 600 °C) were observed during in situ TEM heating of the RT deposited film. Sliding contact during friction and wear tests resulted in a pressure-induced reorientation of MoS2 basal planes parallel to the sliding direction. The subsurface coarsened Au nanoparticles also provide an underlying load support allowing shear of surface MoS2 basal planes.