We solve the Schrödinger equation for an interacting spin chain locally coupled to a quantum environment with a specific degeneracy structure. The reduced dynamics of the whole spin chain as well as of single spins is analyzed. We show that the total spin chain relaxes to a thermal equilibrium state independently of the internal interaction strength. In contrast, the asymptotic states of each individual spin are thermal for weak but nonthermal for stronger spin-spin coupling. The transition between both scenarios is found for couplings of the order of 0.1 x deltaE , with deltaE denoting the Zeeman splitting. We compare these results with a master-equation treatment; when time averaged, both approaches lead to the same asymptotic state and finally with analytical results.