The accurate quantitative relationship between the excess volume at the grain boundary and the nanograin size in nanocrystalline alloy is deduced. The fundamental thermodynamic function of nanocrystalline alloy is derived as a function of nanograin size and temperature. By taking the SmCo7 alloy for example, the thermal stability of the nanocrystalline alloy, as well as its evolution characteristics, is studied based on the calculated excess Gibbs free energy of nanograin boundary. The results show that the nanostructure with grain size below a critical value that corresponds to the maximum excess Gibbs free energy can have higher thermal stability than a coarser nanograin structure. Once the grain size is larger than the critical value, the nanostructure may lose its stability and undergo discontinuous grain growth. By combining the nanothermodynamic model with the cellular automaton algorithm, the quantitative and visual simulations of nanograin growth in nanocrystalline SmCo7 alloy are performed. The nanograin growth behavior described by the two approaches are consistent with each other, which validates the conclusion of the thermal stability of nanocrystalline alloy, drawn from the present thermodynamic study.