A method for formation of the palladium layer in a thermally stable porous substrate was studied. A composite membrane with Pd layer encapsulated in a porous alpha-alumina substrate (Pd/Al2O3(PF)) was successfully prepared by a new seeding technique and electroless plating. From SEM-EDX, the Pd layer was observed only in the porous substrate at a depth of 10 mu m from the top surface. This Membrane showed extremely high H-2 permselectivity (alpha(H2/N2) > 10000) at 773 K and good stability.