Palladium membrane used for hydrogen extraction from a gas mixture at elevated temperature is often deposited on a porous metal or ceramic substrate. This paper demonstrates the effect of porous Inconel substrate on the microstructure of palladium membrane during hydrogen permeation. It is found that the chemical reaction between palladium and phosphorus/phosphates takes place and forms the intermediate compound Pd6P that makes the surface layer of the membrane damage when palladium membrane deposited on this porous Inconel substrate is used for hydrogen extraction at the temperature of 550 degrees C. Phosphorus is generated from the inorganic binders that are used in the fabrication of porous Inconel substrate and from the trace in the substrate. This chemical reaction should be noticeable, as it will be detrimental to palladium membrane at high temperature. The obtained result also indicates that the deposition of palladium as hydrogenation catalysts should be avoided using on the work environment of phosphorus or phosphates. (c) 2006 Elsevier B.V. All rights reserved.