Large-scale atomistic simulations are performed to study different mechanisms of plastic deformation in uncapped submicron thin polycrystalline copper films. It was recently shown that diffusional mass transport along grain boundaries in thin films leads to the formation of a novel defect identified as a diffusion wedge (Gao et al 1999 Acta Mater. 47 2865–78). Eventually, a crack-like stress field develops near the grain boundary–substrate junction as tractions along the grain boundaries relax under the constraint that the adhesion between film and substrate prohibits strain relaxation close to the interface. The emergence of crack-like stress concentration causes nucleation of an unexpected class of dislocations near the root of the grain boundary on glide planes parallel to the film surface. These dislocations are unexpected because there is no driving force for parallel glide (PG) in the overall biaxial stress field. In this work, we demonstrate that PG dislocations dominate plasticity in polycrystalline submicron thin films when tractions along the grain boundaries are relaxed by diffusional creep. We illustrate that partial dislocations play an important role in plasticity of nanostructured thin films and that the grain boundary structure has a significant influence on dislocation density in neighbouring grains. To allow modelling of thicker films, we propose a discrete dislocation model of diffusional creep to investigate the effect of PG on the flow stress of submicron films. A deformation map summarizes the range of dominance of different strain relaxation mechanisms in ultra-thin films. We show that besides the classical 'threading dislocation' regime, there are numerous novel mechanisms once the film thickness approaches the nanoscale.