The microstructure of palladium thin films prepared by dc planar magnetron sputtering at low deposition temperatures was investigated as a function of the argon partial pressure. The films were characterized by spectroellipsometry, electron microscopy, and x-ray diffraction. Below a transition pressure Pt≂15 mTorr, the films consisted of densely packed grains, corresponding to the zone T region in Thornton’s structure zone model. Above this transition pressure the films developed into a more voided columnar structure, characteristic of a zone 1 region. A microstructural analysis of the spectroellipsometric data indicated a general trend to increased porosity and microroughness of the films with higher argon pressures. Furthermore, the effective medium theory of Sen, Scala, and Cohen (SSC), relevant for a random coated-particle microstructure where the grains are optically isolated from each other, was required to describe the films prepared with argon pressures above Pt. The zone 1 region was therefore best described optically as a random coated-particle microstructure where the microroughness and porosity varied with the argon pressure. Spectroellipsometry, which is sensitive to the film microstructure, was able to identify the zone T/zone 1 transition through the changes in the pseudodielectric function of the Pd films. Electron microscopy confirmed that for the thin films prepared at argon pressures higher than Pt, the grains became isolated by void boundaries, thus further supporting the random coated-particle basis of the SSC theory.