This research investigated the intricate process of constructing compound nouns in Indonesian through the lens of derivational morphology. Indonesians, renowned for their rich linguistic structure, employed compound nouns extensively in daily communication. This study delved into the mechanisms behind the formation of compound nouns, analyzing the intricate interplay between constituent morphemes and the rules governing their combination. Employing a derivational morphology framework, the research aimed to unveil the underlying patterns, rules, and semantic nuances that governed the construction of compound nouns in Indonesian. The findings showed that (1) the formation of compound nouns in the Indonesian language primarily occurred through compounding, which involved the combination of two or more free morphemes; (2) there were various cognitive processes such as categorization, metaphorical extension, and conceptual blending for better understanding and generating compound nouns; and (3) a set of systematic rules dictated how morphemes were combined and modified to create complex compound nouns. The findings contributed to a deeper understanding of the structural intricacies of the language, shedding light on its derivational processes and their implications for linguistic analysis.