AbstractSurge current (SC) capability is one of the main aspects of reliability for silicon carbide (SiC) power devices. In this work, the influences of neutron radiation‐induced defects on the SC capability and reliability of SiC P‐intrinsic‐N (PiN) diodes were comprehensively investigated. It was found that the surge capability of the diodes can be deteriorated even under the slightly enhanced formation of carbon‐vacancy‐related Z1/2 and EH6/7 defects introduced by neutron irradiation. Surprisingly, it was found that the forward voltage (VF) decreases with the increased SC and the stress cycles in the irradiated diodes, which is usually found to increase under the SC tests and attributed to the bipolar degradation (BPD). By using technology computer‐aided design simulation and deep‐level transient spectroscopy characterization, it was found that the significant self‐heating during surge stress leads to the annealing effect on the Z1/2 defects through the promoted recombination with the nearest and second neighbor carbon interstitials injected by irradiation, which thus plays a dominant role in the decrease of VF over the BPD.