We have studied structure and phase formation processes in the Ti-N-Ni system during the growth of coatings by cathodic arc physical vapor deposition (PVD). The incorporation of nickel has been shown to reduce the crystallite size of TiN from 100–120 to 15–18 nm. This is accompanied by a transition from a columnar microstructure, typical of PVD TiN coatings, to an equiaxed one. In the concentration range 0 to 12–13 at %, the nickel in the coatings is X-ray amorphous. Further increasing the nickel content leads to the formation of the intermetallic phase TiNi, which is in turn accompanied by the generation of pores in the structure of the coating. We have determined optimal nickel concentrations in the composite coatings (8–12 at %) that ensure hardness, Young’s modulus, H3/E2, and H/E of 52 GPa, 516 GPa, 0.57 GPa, and 0.104, respectively. We have demonstrated that the nanostructured TiN-Ni (2.8 to 12 at % Ni) coatings undergo failure by a cohesion mechanism. Complete wear of the coatings only occurred starting at a load of 90 N, attesting to high adhesion/cohesion strength of the system.