We have studied crystallization in a system of sedimenting colloids in real space using fluorescence confocal microscopy. During sedimentation a gradient in particle concentration develops at the bottom of the sample container. The presence of the lower boundary wall induces layering in the liquid and, upon increasing sediment thickness, crystallization occurs in these liquid layers. Crystallization in the first layer was found to proceed via a first-order transition. The formation of small crystal nuclei in this layer induced epitaxial crystal growth in the second layer on top of these two-dimensional crystal planes, which resulted in both layers undergoing the phase transition simultaneously. The critical osmotic pressures for crystallization at a flat wall as well as for epitaxial crystallization on an already crystallized layer were determined. The nucleation-and-growth mechanism led to a polycrystalline end state. Due to this polycrystallinity we could not determine whether the crystallization process involved an intermediate "hexatic-like" phase. Our results regarding the nature of the transition in the first two layers are in agreement with recent computer simulations [Biben, Ohnesorge, and Lowen, Europhys. Lett. 28, 665 (1994)]. (C) 2003 American Institute of Physics.