The palladium membranes were fabricated by mean of electroless plating method which provided thin and uniform film on a tubular alumina porous support. Subsequently, the annealing process which is one of the effective ways to enhance the permeability of membrane was performed in the temperature range of 600-800°C. The annealing temperature and time were found to have influence on membrane microstructure and its performance. Palladium annealed at 700°C for 8 hrs in nitrogen atmosphere had the highest hydrogen permeability and separation factor when operated at 600°C. The membrane morphologies observed by SEM showed that the sample treated at higher temperature had lower surface roughness. The annealed palladium composite membrane at 800°C revealed that some voids which occurred during electroless plating process were enlarged and caused the lower separation factor.