Large strain deformation is used to make fine nanolayered two-phase composites from stacks of conventional polycrystalline sheets. The final materials made by this technique possess a crystallographically highly oriented structure containing nearly atomically perfect interfaces prevailing ubiquitously throughout the material. How this ordered structure evolves with strain from the coarser, more disordered state is not known. Here, using microstructural analysis and computational modeling, we discover a local interface-affected zone (IAZ) possessing the same crystallographically sharp structure in coarse layered composites as the final nanolayered composites. This means that this strongly oriented interface “zone” survives the mechanical work and overtakes the structure as it refines to the nanoscale. In essence, through the formation of this interface zone, the crossover to a highly oriented nanostructure occurs. Using microstructural analysis and crystal plasticity simulations, we show that the IAZ is a consequence of slip accommodation at the interface. This insight is valuable for developing processing strategies for superior interface-dominated materials.