We combine focused experiments with molecular dynamics simulations to investigate in detail the formation of {0 0 1} loops in nanosecond laser-annealed silicon. We demonstrate that at temperatures close to the melting point, self-interstitial rich silicon is driven into dense liquid-like droplets that are highly mobile within the solid crystalline matrix. These liquid droplets grow by a coalescence mechanism and eventually transform into {0 0 1} loops through a liquid-to-solid phase transition in the nanosecond timescale.