•Small Zr additions to Cu led to significant lattice parameter anisotropy in the as-deposited Cu100−X-ZrX (2.5 at% ≤ x ≤ 5.5 at%) alloy thin films.•XRD line profile analysis confirmed progressive generation of dislocations and planar faults with increasing Zr content in Cu-Zr alloy films.•The observed microstructural changes led to the generation of tensile stresses and stress gradients in the Cu-Zr thin films. Display omitted Grazing incidence X-ray diffraction (GIXRD) and scanning transmission electron microscopy (STEM) combined with energy dispersive X-ray spectroscopy (EDS) were employed to study the microstructure evolution and stress development in the nanocrystalline Cu100−X-ZrX (2.5 at% ≤ x ≤ 5.5 at%) alloy thin films. Small Zr additions to Cu led to significant lattice parameter anisotropy in the as-deposited Cu-Zr thin films both due to macroscopic lattice strain and stacking faults in the Cu matrix. Strain free lattice parameters obtained after the XRD stress analysis of Cu-Zr thin films confirmed formation of a supersaturated substitutional Cu-Zr solid solution. For the first time, the study of film microstructure by XRD line profile analysis (XLPA) confirmed progressive generation of dislocations and planar faults with increasing Zr composition in Cu-Zr alloy films. These microstructural changes led to the generation of tensile stresses in the thin films along with considerable stress gradients across the films thicknesses which are quantified by the traditional dψhkl−Sin2ψ and GIXRD stress measurement methods. The origin of tensile stresses and stress gradients in the Cu-Zr film are discussed on the basis of film growth and heterogeneous microstructure with changing Zr composition.