Self-lubricating nanocomposite carbides and nitrides coatings that enable to exhibit both low friction coefficient (CoF) and high wear resistance over a wide temperature range are in high demand for mechanical components used in aerospace and marine systems. In this work, we developed high-purity Ag-doped Cr2AlC (Ag–Cr2AlC) nanocomposite coatings using a facile arc/sputter deposition technique followed by annealing. Compared to typical nanocrystalline Cr2AlC MAX phase coatings, the incorporation of Ag resulted in a unique nanocomposite structure, where Ag encapsulates elongated Cr2AlC nanograins. The dry sliding wear of this material was evaluated using the ball-on-disc method, with an Al2O3 ball as the counter body, at temperature ranging from 25 °C to 700 °C. Interestingly, Ag dopants contributed to a significant reduction in COF and wear rate at temperatures below 500 °C, while the synergistic effect of the Ag distributed at grain boundaries and the outermost oxides of Cr2O3 and Al2O3 generated during friction dominated the excellent self-lubrication at 500–700 °C. Notably, the Ag–Cr2AlC coatings promoted the in-situ formation of gradient bilayer oxides, consisting of a loosely coarse-grained inner layer and a densely refine-grained outmost layer. The combination of unique gradient oxides and a combined nanocomposite matrix allows the coating to accommodate plastic strains without extended cracks or localized brittle fracture.