The interaction of surface acoustic waves (SAWs) with liquids enables the production of aerosols with adjustable droplet sizes in the micrometer range expelled from a very compact source. Understanding the nonlinear acousto-hydrodynamics of SAWs with a regulated micro-scale liquid film is essential for acousto-microfluidics platforms, particularly aerosol generators. In this study, we demonstrate the presence of micro-cavitation in an MHz-frequency SAW aerosol generation platform, which is touted as a leap in aerosol technology with versatile application fields including biomolecule inhalation therapy, micro-chromatography and spectroscopy, olfactory displays, and material deposition. Using analysis methods with high temporal and spatial resolution, we demonstrate that SAWs stabilize spatially arranged liquid micro-domes atop the generator’s surface. Our experiments show that these liquid domes become acoustic resonators with highly fluctuating pressure amplitudes that can even nucleate cavitation bubbles, as supported by analytical modeling. The observed fragmentation of liquid domes indicates the participation of three droplet generation mechanisms, including cavitation and capillary-wave instabilities. During aerosol generation, the cavitation bubbles contribute to the ejection of droplets from the liquid domes and also explain observed microstructural damage patterns on the chip surface eventually caused by cavitation-based erosion.