The development of reliable interconnects in thermoelectric (TE) modules is essential for the durability and serviceability of these solid-state devices. PbTe-based devices are used in mid-temperature range applications, with Ni being the most preferred interconnect. Ni reacts with PbTe to form a binary intermetallic, Ni3Te2 (β2). The sustained growth of this phase at higher service temperatures is adversarial to the long-term reliability of interconnects. This paper reports and discusses the beneficiary role of minor Fe-addition in the Ni contact alloy to arrest such unwarranted chemical interaction while ensuring proper bonding. PbTe and Ni-Fe (Fe = 1 at.%, 5 at.%) discs are diffusion bonded at 700 °C for various holding times. The current investigation leads to three noteworthy observations: 1) the formation of Fe-enriched Ni-Fe phase islands at the interface at microscale (1 - 10 µm), (2) Fe-segregation at the local interfaces (∼ 10 nm), and (3) the growth of a Ni-rich metastable Ni3-xTe phase, not present in Ni-Te binary phase diagram. Detailed examinations of these phenomena and crystallographic relations (β2 and Ni3-xTe) are conducted through advanced analytical TEM/STEM techniques. Furthermore, the PbTe-Ni reaction formulation is modified to accommodate such a Fe-enrichment phenomenon and is validated through free energy calculations.