The bilayers of Pd and Fe with different thickness and relative positions were grown on Si(1 1 1)-7 x 7 surface at room temperature. For the investigation of the thermal annealing induced inter-diffusion and the corresponding magnetic behavior, Auger electron spectroscopy (AES) measurement was carried out after various annealing processes, including the variation of annealing duration and temperature. With the annealing temperature of 300-500 K, the Pd/Fe bilayers were stable. Slight Si segregated into the thin film at around 700 K. Above 700 K, more serious Si segregation occurred and most of the Pd/Fe bilayer was mixed with Si, forming a silicide layer. 700-800 K annealing also induced change of Pd/Fe AES ratio, indicating the inter-diffusion between Pd and Fe layers. To overcome the unavoidable silicide formation induced magnetic dead layer, a relative thick Fe film of 20 ML capped with 1.5 ML Pd was chosen for the investigation of magnetism. The magnetic coercivity (He) increased by 2-3 times with the annealing temperature up to 740 K. Obvious hydrogenation effect was observed in 710 K-annealed sample; the in plane I-1c increased by more than 10% when the hydrogen pressure was above 200 mbar. After further annealing at 740-800 K, the hydrogenation effect on I-1c became nearly unobservable. The annealing induced Pd-rich magnetic interface is supposed to dominate the hydrogenation effect on magnetism. (C) 2016 Elsevier B.V. All rights reserved.