The main purposes for developing low-alloyed Au bonding wires were to increase wire stiffness and to control the wire loop profile and heat-affected zone length. For these reasons, many alloying elements have been used for the various Au bonding wires. Although there have been many studies reported on wire strengthening mechanisms by adding alloying elements, few studies were performed on their effects on Au bonding wires and Al pad interfacial reactions. Palladium has been used as one of the important alloying elements of Au bonding wires. In this study, Au-1wt.%Pd wire was used to make Au stud bumps on Al pads, and effects of Pd on AU/Al interfacial reactions, at 150degreesC, 175degreesC, and 200degreesC for 0 to 1200 h thermal aging, were investigated. Cross-sectional scanning electron microscopy (SEM), energy-dispersive spectroscopy (EDS), and electron probe microanalysis (EPMA) were performed to identify intermetallic compound (IMC) phases and Pd behavior at the AU/Al bonding interface. According to experimental results, the dominant IMC was Au5Al2, and a Pd-rich layer was at the Au wire and Au-Al IMC. Moreover, Au-Al interfacial reactions were significantly affected by the Pd-rich layer. Finally, bump shear tests were performed to investigate the effects of Pd-rich layers on Au wire bond reliability, and there were three different failure modes. Cracks, accompanied with IMC growth, formed above a Pd-rich layer. Furthermore, in longer aging times, fracture occurred along the crack, which propagated from the edges of a bonding interface to the center along a Pd-rich layer.