Pd-based membranes play a critical role in the field of hydrogen purification and small-scale hydrogen generation. The microstructure and composition of ultra-thin Pd membranes immediately determines their performance and stability, which are however complex and elusive. We applied for the first time a novel technique of environmental scanning electron microscopy (ESEM) together with EDS analysis for in-situ investigation of microstructure and composition of Pd composite membranes under gas-thermal treatment. It enables step by step analysis of the evolution process and offers more meticulous details compared to ex-situ technologies through analysis at exactly the same location of membrane samples. Here we observed the elimination of Pd crystallites as well as the homogenization/diffusion along the whole membrane surface following high T treatment under inert gas or H-2 atmosphere. Gradual evolution of microhillocks on Pd membrane surface was resulted due to alpha-beta phase transition or exposure to either O-2 or H2O, which can be effectively "smoothened" out during H-2 treatment. The exposure to steam exhibited a mild oxidation effect without pinhole formations, which appears a more appropriate surface cleaning process compared to air/oxygen treatment. A significant interlayer diffusion was revealed between Pd layer and ZrO2/alumina substrate in Hz/O-2/H2O atmosphere.