This study investigated the mechanical and electrical properties of Ag–2Pd wire after thermal annealing. The thermal stability of the tested wire was examined by separately imposing static annealing at275°C,325°C and 375°C in a vacuum environment. It was found that annealing the Ag–2Pd wire at 275°C promoted the formation of a fully annealed structure with equiaxed grains. Annealing Ag–2Pd wire had a shorter heat affect zone (HAZ) length than those of conventional wire, and offered outstanding mechanical properties. A long-term electrical test found Ag3(Pd)Al and Ag2(Pd)Al compounds between the Ag–Pd ball and Al pad.These results confirmed the high-reliability properties of annealed Ag–2Pd wires for the wire bonding process.