The microstructural reaction of Pd/Ni contact to p-type GaN has been investigated using transmission electron microscopy, and the results were used to interpret the electrical properties of the ohmic contact. When the contact was annealed at 500degreesC, the contact resistivity decreased to 5.7 x 10(25) Omega cm(2) and the layer structure changed to NiO/Ga2Pd5/Ga5Pd/GaN. The NiO layer produced at the surface acted as a diffusion barrier for the outdiffusion of Pd atoms to the surface. This promoted the formation of such Pd gallides due to the reaction of Pd layer with GaN substrate. Subsequently, Ga vacancies, acting as effective acceptors for electrons, were produced below the contact. The NiO layer could also suppress the outdiffusion of N atoms released from the decomposed GaN, leading to the interfacial region to be a N-rich condition. Therefore, the good thermal stability as well as low contact resistivity could be simultaneously realized with the Pd/Ni contact. (C) 2003 The Electrochemical Society.