Using a two-step seed-mediated growth method, we synthesized bimetallic nanoparticles (NPs) having a gold octahedron core and a palladium epitaxial shell with controlled Pd-shell thickness. The mismatch-release mechanism between the Au core and Pd shell of the NPs was systematically investigated by high-resolution transmission electron microscopy. In the NPs coated with a single atomic layer of Pd, the strain between the surface Pd layer and the Au core is released by Shockley partial dislocations (SPDs) accompanied by the formation of stacking faults. For NPs coated with more Pd (>2 nm), the stacking faults still exist, but no SPDs are found. This may be due to the diffusion of Au atoms into the Pd shell layers to eliminate the SPDs. At the same time, a long-range ordered L11 AuPd alloy phase has been identified in the interface area, supporting the assumption of the diffusion of Au into Pd to release the interface mismatch. With increasing numbers of Pd shell layers, the shape of the Au-Pd NP changes, step by step, from truncated-octahedral to cubic. After the bimetallic NPs were annealed at 523 K for 10 min, the SPDs at the surface of the NPs coated with a single atomic layer of Pd disappeared due to diffusion of the Au atoms into the surface layer, while the stacking faults and the L11 Au-Pd alloyed structure remained. When the annealing temperature was increased to 800 K, electron diffraction patterns and diffraction contrast images revealed that the NPs became a uniform Au-Pd alloy, and most of the stacking faults disappeared as a result of the annealing. Even so, some clues still support the existence of the L11 phase, which suggests that the L11 phase is a stable, long-range ordered structure in Au-Pd bimetallic NPs. © 2010 American Chemical Society.