Thin film diffusion couples (Pd-Cu, individual layer thicknesses: 50 nm) have been prepared by DC-magnetron sputtering on silicon substrates coated with amorphous inter-layers (Si3N4 on top of SiO2). The microstructural development, phase formation and the stress evolution during diffusion annealing have been investigated employing Auger-electron spectroscopy in combination with sputter depth profiling, ex-situ and, in particular, in-situ X-ray diffraction measurements. Upon annealing at relatively low temperatures (175°C to 250°C) for durations up to 100 hours, considerable diffusional intermixing occurs. Interdiffusion is accompanied by the sequential formation of a new phase (Cu3Pd). The detected stress changes are discussed in terms of possible mechanisms of stress generation.