Previously, the scanning tunneling microscope has been employed to deposit single nanoscopic silver structures from aqueous silver solutions onto the graphite basal plane surface. In this paper, the mechanism of this electrochemical lithography is elucidated. The deposition of metal occurs via a two-step mechanism following the application of a sample negative pulse to the graphite surface. First, within 5 mu s of the application of a bias pulse having an amplitude greater than +4 V (tip positive), the formation of a shallow, circular pit in the surface is observed. If the pulse is sustained for longer durations, the reductive deposition of metal begins to occur at similar to 10 mu s and the volume of the nascent silver nanostructure saturates at 30-50 mu s. The resulting metal nanostructure has a disk geometry with typical dimensions of 200-400 Angstrom in diameter and 20-50 Angstrom in height. STM data coupled with electrochemical measurements and computer simulations of the deposition process demonstrate that the silver metal involved in nanostructure formation is initially present as an underpotentially deposited (UPD) monolayer of silver on the surface of the platinum STM tip. After application of a bias pulse, this adsorbed silver is oxidatively desorbed and silver ions migrate across the tip-sample gap and are deposited in the shallow nucleation site in the graphite surface. This adsorbed silver is susceptible to depletion when silver nanostructures are deposited in rapid succession from dilute silver electrolytes.