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We have synthesized Ag–Cu alloy nanoparticles of four different compositions by using the laser ablation technique with the target under aqueous medium. Following this, we report a morphological transition in the nanoparticles from a normal two-phase microstructure to a structure with random segregation and finally a core–shell structure at small sizes as a function of Cu concentration. To illustrate the composition dependence of morphology, we report observations carried out on nanoparticles of two different sizes: ∼5 and ∼20 nm. The results could be rationalized through the thermodynamic modeling of free energy of phase mixing and wettability of the alloying phases.