Mechanical properties of metals are highly influenced by the microstructures. The investigation of the microstructures and crystal defects providesan access to better understand the inbeing behind the phenomena for deformation. TEM provides a powerful and most widely used technique for the observation of dislocations and other crystal defects. Nanocrystalline palladium thin films with 310 nm thickness deposited by electron-beam evaporation and deformed by onchip tensile testing reveal a high strain hardening capacity, much larger than expected considering the ~25 nm grain size. The asgrown films involve coherent single and multifold twin boundaries (TBs) which could be claimed to result from a grain boundary (GB)migration mechanism during the deposition of the films. Coherent TBs act as barriers to dislocation motion as well as sources for dislocation storage and multiplication via specific TB/dislocation
reactions. These reactions partly explain the high strain hardening capacity. This investigation on Pd thin films indicates directions for further enhancement of the ductility of materials with high stacking fault energy (SFE).