Using He atom scattering, layer-by-layer erosion of InSb(110) by low energy ion bombardment has been observed to proceed via nucleation of vacancy islands, island growth and coalescence. The mechanism is in full agreement with theoretical models developed for crystal growth, with diffusing adatoms substituted by diffusing vacancies. In particular it has been observed that coalescence of the vacancy islands sets in after the removal of small fractions of a monolayer and that the average terrace width increases with increasing number of sputtered monolayers.