In this work we observed strain relaxation at 550 °C following the interaction of palladium with strained Si1-xGex epilayers. The germanium concentrations x in the Si1-xGex films were 0.09 and 0.21 with thicknesses of 3500 Å and 2300 Å respectively, which are below the critical thickness hc. An overlayer of palladium, 1300 Å thick, was deposited onto the Si1-xGex epilayers, and the samples were annealed at 250 and 550 °C in a vacuum furnace for compound formation. Low temperature anneals (250 °C) were characterized by the formation of a uniform, highly textured ternary compound (Pd2Si1-yGey with y < x) on top of the unreacted Si1-xGex layer, and no substantial change in the state of strain was observed in the underlying unreacted Si1-xGex layer. On the contrary, a higher temperature anneal (550 °C) of metallized samples was characterized by the formation of a double-layer structure, with a highly defected germanium-rich Si1-zGez layer (0.37 < z < 0.43) between the ternary compound and the underlying unreacted Si1-xGex. In these samples a considerable decrease in the vertical lattice parameter and correspondingly strain relaxation in the unreacted Si1-xGex layer was observed.