In order to improve the electrochemical performance, the alloy represented by the composition ZrMn0.2V0.2Fe0.8Ni0.8 was microencapsulated with Cu, Ni and Pd. Microencapsulation was done prior to test electrode preparation by electroless plating method. The electrode characteristics such as electrochemical capacity and cycle life were studied for the uncoated and coated alloys. It was found that the coated alloy showed higher discharge capacity and lower activation time in comparison to the uncoated alloy. The phase composition of the alloys was characterized using X-ray diffraction (XRD) and surface morphology was studied using scanning electron microscope (SEM). It was found that the surface microencapsulation of alloy powder was effective in improving the electrode discharge capacity and in reducing the activation time. (C) 2003 International Association for Hydrogen Energy. Published by Elsevier Ltd. All rights reserved.